Question

A small business firm. produces raincoats and overeoats for commercial sale and for the Government. Most items are manufactured for specific customer orders. At the beginning of the year. the comptroller estimated costs and production hours for operations throughout the year. Note that Department A is more labor intensive and Department B is more automated:

	Dept A	Dept B	Total
Direct Material Cost	338000	23500	361500
Direct Labor Cost	318000	110000	428000
Department Overhead Cost	276000	480000	756000
Direct Labor Hours	30000	10000	40000
Machine Hours	2000	40000	42000

During the year, Job #l23, a firm fixed—price Government contract for production of 3.000 raincoats, will be started and completed. Estimate contract cost using the rates determined in Question 1 and the following information. Use the Job Cost Summary table for your calculations. Note Department A‘s overhead rate was calculated by using direct labor hours as the base and Department B utilized machine hours.

I Materials cost totaled $3,200 for Department A and $3740 for Department B.

I Direct labor hours totaled 240 for Department A and 80 for Department B.

I Machine hours totaled 120 for Department A and 300 for Depamnent B

Find total cost for Department A and B, show all work

2) At the end of the year, the Comptroller accumulated the total actual costs and hours incurred by Department A and Department B during the year for the company. Using the information provided below, calculate the final overhead rates for both departments.

	Dept A	Dept B	Total
Direct Material Cost	337000	25000	362000
Direct Labor Cost	360400	99000	459400
Department Overhead Cost	299000	495000	794000
Direct Labor Hours	34000	9000	43000
Machine Hours	1000	41000	42000

Department A _ direct labor hour?

Department B _ machine per hour ?

3 Why are the rates that you developed in Question 2 different than the rates developed in Question 1?

4. Given the actual costs stated above in 2, what would be the final cost of Job #123 using the overhead rates determined in Question 1'

Answer 1

Solution of 2) Question