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Jetsons Jetpacks manufactures jetpacks and uses divisional-based costing to allocate overhead on the basis of direct...

Jetsons Jetpacks manufactures jetpacks and uses divisional-based costing to allocate overhead on the basis of direct labour hours. Direct materials and direct labour costs per sprocket are $197 and $103, respectively.

Producing one jetpack requires 32 labour hours comprised of:

  • 15 hours in machining
  • 10 hours in assembly, and
  •   7 hours in finishing

Information for each department is as follows:

Cutting

Assembly

Finishing

Overhead costs

$185,000

$102,000

$75,000

Direct labour hours

30,000

8,000

15,000

Calculate the total cost of producing one jetpack.

Solutions

Expert Solution

Cutting Department Overhead allocation rate = Overhead Costs/ Direct labor Hours

Cutting Department Overhead allocation rate = $185,000/ 30,000

Cutting Department Overhead allocation rate = $6.17 Per hour

Assembly Department Overhead allocation rate = Overhead Costs/ Direct labor Hours

Assembly Department Overhead allocation rate = $102,000/ 8,000

Assembly Department Overhead allocation rate = $12.75 Per hour

Finishing Department Overhead allocation rate = Overhead Costs/ Direct labor Hours

Finishing Department Overhead allocation rate = $75,000/ 15,000

Finishing Department Overhead allocation rate = $5.00 Per hour

Calculation of the total cost of producing on Jetpack:

Particulars Amount ($)
Direct Material 197.00
Direct Labor 103.00
Cutting Department Overhead Cost (15 Hours $6.17) 92.55
Assembly Department Overhead Cost (10 Hours $12.75) 127.50
Finishing Department Overhead Cost (7 Hours ​​​​​​​ $5.00) 35.00
Total Cost of production of one Jetpack 555.05

ekkarill92 answered 1 year ago
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