Question
In: Accounting
Lowell Company uses a normal job-costing system at its Minneapolis plant. The plant has a machining...
Lowell Company uses a normal job-costing system at its Minneapolis plant. The plant has a machining department and an assembly department. Its job-costing system has two direct-cost categories (direct materials and direct manufacturing labor) and two manufacturing overhead cost pools (the machining departmentoverhead, allocated to jobs based on actual machine-hours, and the assembly department overhead, allocated to jobs based on actual direct manufacturing laborcosts). The 2017 budget for the plant is as follows:
Machining Department
Assembly Department
Manufacturing overhead
Machining $1,800,000
Assembly $3,900,000
Direct manufacturing labor costs
Machining $1,000,000
Assembly $3,000,000
Direct manufacturing labor-hours
Machining 160,000
Assembly 200,000
Machine-hours
Machining 60,000
Assembly 200,000
1. Identify the components of the overview diagram of Lowell's job-costing system. Compute the budgeted manufacturing overhead rate for each department.
2. During February, the job-cost record for Job 494 contained the following:
|
Machining Department |
Assembly Department |
|
|
Direct material used |
$48,000 |
$78,000 |
|
Direct manufacturing labor costs |
$18,000 |
$20,000 |
|
Direct manufacturing labor-hours |
1,400 |
1,500 |
|
Machine-hours |
2,600 |
1,600 |
Compute the total manufacturing overhead costs allocated to Job 494.
3. At the end of 2017, the actual manufacturing overhead costs were $2,100,000
in machining and $5,300,000 in assembly. Assume that 66,000 actual machine-hours were used in machining and that actual direct manufacturing labor costs in assembly were $3,300,000.
Compute the over- or underallocated manufacturing overhead for each department.
Solutions
Expert Solution
| 1) | ||
| Machining Department Manufacturing Overhead | ||
| INDIRECT COST POOL | ||
| Assembly Department Manufacturing Overhead | ||
| Machine-Hours | ||
| COST ALLOCATION BASE | ||
| Direct Manuf.Labor Cost | ||
| Indirect Costs | ||
| COST OBJECT PRODUCT | ||
| Direct Costs | ||
| Direct Materials | ||
| DIRECT COST | ||
| Direct Manufacturing Labor | ||
| Budgeted manufacturing overhead | ||
| Machining overhead = $1,800,000/60,000 MH | $30.00 | per machine-hour |
| Assembly overhead = 3900000/3000000 DLH | 130.00% | of direct manuf. labor cost |
| 2) | ||
| Machining department = 2,600 hours x $30 | $78,000.00 | |
| Assembly department =130% x 20000 | $26,000.00 | |
| Total manufacturing overhead allocated to Job 494 | $104,000.00 | |
| 3) | ||
| Machining | Assembly | |
| Actual manufacturing overhead | $2,100,000.00 | $5,300,000.00 |
| Manufacturing overhead allocated (66000 x $30); 3300000 x 130% | $1,980,000.00 | $4,290,000.00 |
| Underallocated (Overallocated) | $120,000.00 | $1,010,000.00 |
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