In: Accounting
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.
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 | |||||