Question

Job Costs Using Activity-Based Costing Heitger Company is a job-order costing firm that uses activity-based costing to apply overhead to jobs. Heitger identified three overhead activities and related drivers. Budgeted information for the year is as follows: Activity Cost Driver Amount of Driver Materials handling $108,000 Number of moves 4,500 Engineering 165,000 Number of change orders 10,000 Other overhead 263,200 Direct labor hours 47,000 Heitger worked on four jobs in July. Data are as follows: Job 13-43 Job 13-44 Job 13-45 Job 13-46 Beginning balance $20,000 $19,500 $2,800 $0 Direct materials $5,900 $9,750 $10,600 $9,800 Direct labor cost $950 $1,100 $1,640 $100 Job 13-43 Job 13-44 Job 13-45 Job 13-46 Number of moves 45 47 33 7 Number of change orders 34 35 21 16 Direct labor hours 950 1,100 1,640 100 By July 31, Jobs 13-43 and 13-44 were completed and sold. Jobs 13-45 and 13-46 were still in process. Required: 1. Calculate the activity rates for each of the three overhead activities. Round all activity rates to the nearest cent. Materials handling rate $ per move Engineering rate $ per change order Other overhead rate $ per direct labor hour Hide 2. Prepare job-order cost sheets for each job showing all costs through July 31. When required, round your answers to the nearest dollar. If an amount is zero, enter "0". Heitger Company Job-Order Cost Sheets Job 13-43 Job 13-44 Job 13-45 Job 13-46 Balance, July 1 $ $ $ $ Direct materials Direct labor cost Materials handling Engineering Other overhead Total $ $ $ $ 3. Calculate the balance in Work in Process on July 31. $ 4. Calculate the cost of goods sold for July. $ 5. What if Job 13-46 required no engineering change orders? What is the difference in the new cost of Job 13-46? $ How would the cost of the other jobs be affected?

Answer 1

STATEMENT SHOWING ACTIVITY RATE OF ACTIVITY POOL
			Activity	Total	Expected	Activity
ACTIVITY COST POOL			Measures	Overheads	Activity	Rate
Direct Material handling			Moves	108000	4500	24
Engineering			Change orders	165000	10000	16.5
Other Overheads			DLH	263200	47000	5.6
Oh allocated:
Activities		Rate	Job 13-43		Job 13-44		Job 13-45		Job 13-46
			Activities	Ohh	Activities	Ohh	Activities	Ohh	Activities	Ohh
Direct Material handling		24	45	1080	47	1128	33	792	7	168
Engineering		16.5	34	561	35	577.5	21	346.5	16	264
Other Overheads		5.6	950	5320	1100	6160	1640	9184	100	560
TOTAL OVERHEADS				6961		7865.5		10322.5		992
Job Cost Sheet
		Job13-43	Job 13-44	Job 13-45	Job 13-46
Balance		20000	19500	2800	0
Current cost:
Material		5900	9750	10600	9800
Labor		950	1100	1640	100
Direct material handling		1080	1128	792	168
Engineering cost		560	577.5	346.5	264
Other overheads		5320	6160	9184	560
TOTAL COST		33810	38215.5	25362.5	10892
Status		SOLD	SOLD	WIP	WIP
Work in process inventory:
Job 13-45			25362.5
Job 13-46			10892
Total Work in process inventory			36254.5
Cost of Goods sold:
Job 13-43			33810
Job 13-44			38215.5
Cost of Goods sold:			72025.5
Req 5.
When no Enginering change ordere is required on Job13-46, then new cost for Job is:
			Job 13-46
Balance			0
Current cost:
Material			9800
Labor			100
Direct material handling			168
Engineering cost			0
Other overheads			560
TOTAL COST			10628
The New cost of Job 13-46 will be: 10628
However, the cost of other jobs will increase as the total of engineering cost will need to be shared by remaining jobs except Job 13-46.