Question

In: Accounting

The Gilster Company, a machine tooling firm, has several plants. One plant, located in St. Falls,...

The Gilster Company, a machine tooling firm, has several plants. One plant, located in St. Falls, Minnesota, uses a job order costing system for its batch production processes. The St. Falls plant has two departments through which most jobs pass. Plantwide overhead, which includes the plant manager’s salary, accounting personnel, cafeteria, and human resources, is budgeted at $250,000. During the past year, actual plantwide overhead was $240,000. Each department’s overhead consists primarily of depreciation and other machine-related expenses. Selected budgeted and actual data from the St. Falls plant for the past year are as follows.

Department A Department B
Budgeted department overhead
(excludes plantwide overhead) $ 150,000 $ 600,000
Actual department overhead 160,000 620,000
Expected total activity:
Direct labor hours 35,000 15,000
Machine-hours 10,000 40,000
Actual activity:
Direct labor hours 51,000 9,000
Machine-hours 10,500 42,000

For the coming year, the accountants at St. Falls are in the process of helping the sales force create bids for several jobs. Projected data pertaining only to job no. 110 are as follows.

Direct materials $ 25,000
Direct labor cost:
Department A (2,200 hr) 45,000
Department B (800 hr) 10,000
Machine-hours projected:
Department A 200
Department B 1,200
Units produced 10,000

Assume the St. Falls plant uses three separate overhead rates to assign overhead costs to jobs.

b-1. Find the plant wide overhead rate by using expected machine hours.

b-2. Find the department overhead rate using expected machine hours for Department A and Department B.

b-3. Calculate the projected manufacturing costs for job 110 using the three separate rates computed in b-1 and b-2.

Solutions

Expert Solution

b-1
CALCULATION OF PLANT WIDE OVERHEAD RATE
Budgeted Plantwide Overhead $       2,50,000.00
Expected Machine hours 50000
Overhead Rate/ per Machine Hour $ 5.00
b-2
DEPARTMENTAL OVERHEAD RATE
Department Overhead Machine Hours Overhead rate
Department A $   1,50,000.00 10000 $ 15.00
Department B $   6,00,000.00 40000 $ 15.00
b-3
CALCULATION OF JOB COST
Particulars Amount
Direct Material $ 25,000.00
Direct Labour Cost
Dep A $ 45,000.00
Dep B $ 10,000.00
Departmental Overhead
Dep A =200*15 $ 3,000.00
Dep B =1200*15 $ 18,000.00
Plant Wide Overhead =(200+1200)*5 $ 7,000.00
TOTAL JOB COST $       1,08,000.00
Units Produced 10000
Per Unit Cost =108000/10000 $ 10.80

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