In: Accounting
Garcia, Inc. uses a job-order costing system for its products, which pass from the Machining Department, to the Assembly Department, to finished-goods inventory. The Machining Department is heavily automated; in contrast, the Assembly Department performs a number of manual-assembly activities. The company applies manufacturing overhead using machine hours in the Machining Department and direct-labor cost in the Assembly Department. The following information relates to the year just ended:
Machining Department | Assembly Department | |||||
Budgeted manufacturing overhead | $ | 4,000,000 | $ | 3,080,000 | ||
Actual manufacturing overhead | 4,270,000 | 3,040,000 | ||||
Budgeted direct-labor cost (based on practical capacity) | 1,500,000 | 5,600,000 | ||||
Actual direct-labor cost | 1,450,000 | 5,780,000 | ||||
Budgeted machine hours (based on practical capacity) | 400,000 | 100,000 | ||||
Actual machine hours | 425,000 | 110,000 | ||||
The data that follow pertain to job no. 775, the only job in
production at year-end.
Machining Department | Assembly Department | |||||
Direct material | $ | 24,500 | $ | 6,800 | ||
Direct labor | $ | 27,800 | $ | 58,700 | ||
Machine hours | 360 | 150 | ||||
Selling and administrative expense amounted to $2,500,000.
2. Compute the cost of the company’s year-end work-in-process inventory.
|
Job No 775 | ||
Calculation of Total cost of Work in Progress Inventory | ||
$ | $ | |
Direct Material | ||
Machining Department | 24,500 | |
Assembly Department | 6,800 | 31,300 |
Direct Labour | ||
Machining Department | 27,800 | |
Assembly Department | 58,700 | 86,500 |
Manufacturing Overheads | ||
Machining Department ( Based on Machine Hours) | 3,617 | |
Assembly Department ( Based On Direct Labour Cost) | 30,873 | 34,490 |
Total Cost For Job No 775 ( Work in progress) | 152,290 |
Calculation of Ovrerhead Allocation Rate
Machining Department : Total Actual Manufacturing Overhead/ Actual Machine Hours = 4270,000/425,000 = $10.05/ Machine Hours
Assembly Department : Total Actual Manufacturing Overhead/ Actual Direct Labour Costs = 3040,000/5780,000 = .53/ Direct Labour Cost