Question

Heitger Company is a job-order costing firm that uses activity-based costing to apply overhead to jobs. Heitger identified three overhead activities and related drivers. Budgeted information for the year is as follows:

Activity	Cost		Driver	Amount of Driver
Materials handling	$81,900		Number of moves	3,500
Engineering	135,150		Number of change orders	8,500
Other overhead	240,000		Direct labor hours	48,000

Heitger worked on four jobs in July. Data are as follows:

	Job 13-43		Job 13-44		Job 13-45		Job 13-46
Beginning balance	$21,300		$19,600		$3,900		$0
Direct materials	$6,100		$9,800		$11,100		$8,000
Direct labor cost	$820		$1,080		$1,670		$110

	Job 13-43		Job 13-44		Job 13-45		Job 13-46
Number of moves	47		48		29		8
Number of change orders	33		43		22		16
Direct labor hours	820		1,080		1,670		110

By July 31, Jobs 13-43 and 13-44 were completed and sold. Jobs 13-45 and 13-46 were still in process.

Required:

1. Calculate the activity rates for each of the three overhead activities. Round all activity rates to the nearest cent.

Materials handling rate	$ per move
Engineering rate	$ per change order
Other overhead rate	$ per direct labor hour

2. Prepare job-order cost sheets for each job showing all costs through July 31.

When required, round your answers to the nearest dollar. If an amount is zero, enter "0".

Heitger Company
Job-Order Cost Sheets
	Job 13-43	Job 13-44	Job 13-45	Job 13-46
Balance, July 1	$	$	$	$
Direct materials
Direct labor cost
Materials handling
Engineering
Other overhead
Total	$	$	$	$

3. Calculate the balance in Work in Process on July 31.
$___________

4. Calculate the cost of goods sold for July.
$__________

5. What if Job 13-46 required no engineering change orders? What is the difference in the new cost of Job 13-46?

$ ___________ : Higher , Lower , No Affect

How would the cost of the other jobs be affected?

Higher , Lower , No affect

Answer 1

1.

Activity	Cost	Quantity	Activity Rate
Material Handling	$           81,900	3500	$            23.40	per move
Engineering	$         135,150	8500	$            15.90	per change order
Other Overhead	$         240,000	48000	$              5.00	per direct labor hour
Total	$         457,050

2.

Heitger Company
Job-Order Cost Sheets
	Job 13-43	Job 13-44	Job 13-45	Job 13-46
Balance, July 1	$           21,300	$           19,600	$            3,900	$              -
Direct materials	$             6,100	$             9,800	$          11,100	$       8,000
Direct labor cost	$                 820	$             1,080	$            1,670	$           110
Materials handling	$             1,100	$             1,123	$               679	$           187
Engineering	$                 525	$                 684	$               350	$           254
Other overhead	$             4,100	$             5,400	$            8,350	$           550
Total	$           33,945	$           37,687	$         26,048	$       9,102

3. Balance in Work in Process = $26048+9102 = $35150

4. Cost of Goods Sold = $33945+37687 = $71631

5. Cost of Job 13-46 will be Lower

No effect on other jobs