Question

Cost Accounting Project Part I Template
Project Part I
1	An overview of the job-costing system is:
2	Budgeted manufacturing overhead divided by allocation base:
a.	Machining Department:
b.	Finishing Department:
			Show work
3	Machining Department overhead
	Finishing Department overhead
	Total manufacturing overhead allocated	$0
4	Total costs of Job 431:
	Direct costs:				Show work
	Direct materials
	Machining Department
	Finishing Department
	Direct manufacturing labor
	Machining Department
	Finishing Department		0
	Indirect costs:
	Machining Department overhead
	Finishing Department overhead		0
	Total costs		$0
	The per-unit product cost of Job 431 is
5
		Machining	Finishing
	Manufacturing overhead incurred (actual)
	Manufacturing overhead allocated
	Machining
	Finishing
	Underallocated manufacturing overhead
	Overallocated manufacturing overhead
	Total overallocated overhead =
6
Clear View is a manufacturer of custom windows and uses a job-costing system at its Orlando, FL plant. The plant has a machining department and a finishing department. Clear View uses normal costing with two direct-cost categories (direct materials and direct manufacturing labor) and two manufacturing overhead cost pools (the machining department with machine-hours as the allocation base and the finishing department with direct manufacturing labor costs as the allocation base). The 2014 budget for the plant is as follows: Machining Department Finishing Department Manufacturing overhead costs $9,065,000 $8,181,000 Direct manufacturing labor costs $ 970,000 $4,050,000 Direct manufacturing labor-hours 36,000 155,000 Machine-hours 185,000 37,000 Prepare an overview diagram of Clear View's job-costing system. What is the budgeted manufacturing overhead rate in the machining department? In the finishing department? During the month of January, the job-cost record for Job 431 shows the following: Machining Department Finishing Department Direct materials used $13,000 $ 5,000 Direct manufacturing labor costs $ 900 $ 1,250 Direct manufacturing labor-hours 20 70 Machine-hours 140 20 Compute the total manufacturing overhead cost allocated to Job 431. Assuming that Job 431 consisted of 300 units of product, what is the cost per unit? Amounts at the end of 2014 are as follows: Machining Department Finishing Department Manufacturing overhead incurred $10,000,000 $7,982,000 Direct manufacturing labor costs $ 1,030,000 $4,100,000 Machine-hours 200,000 34,000 Compute the under- or overallocated manufacturing overhead for each department and for the Dover plant as a whole. Why might Clear View use two different manufacturing overhead cost pools in its job-costing system?

Answer 1

Solution:

Computation of Manufacturing overhead rate
Particulars	Machining Department	Finishing Department
Manufacturing overhead cost	$9,065,000.00	$8,181,000.00
Machine Hours	185000	37000
Direct Manufacturing labor cost	$970,000.00	$4,050,000.00
Allcation base	Machine hours	Direct manufacturing labor cost
Overhead rate:
9065000/185000	$49.00
8181000/4050000		$2.02

Hence overhead rate for machining department is $49 per machine hour and for finishing department is $2.02 per direct labor cost.

Cost Card - Job 431
Particulars	Machining	Finishing	Total
Direct Material used	$13,000.00	$5,000.00	$18,000.00
Direct manufacturing labor cost	$900.00	$1,250.00	$2,150.00
Allocated manufacturing overhead:
Machining - 140 machine hours * 49 per hour Finishing - $1250 * 2.02	$6,860.00	$2,525.00	$9,385.00
Total	$20,760.00	$8,775.00	$29,535.00
Nos of units			$300.00
Cost per unit			$98.45

Computation of under recovery / Over recovery of manufacturing overhead
Particulars	Machining Department	Finishing Department	Total
Manufacturing overhead incurred	$10,000,000.00	$7,982,000.00	$17,982,000.00
Actual Machine Hours	200000	34000	234000
Direct Manufacturing labor cost	$1,030,000.00	$4,100,000.00	$5,130,000.00
Allcation base	Machine hours	Direct manufacturing labor cost
Allocation rate	$49.00	$2.02
Applied manufacturing overhead	$9,800,000.00	$8,282,000.00	$18,082,000.00
Under recovery / (Over recovery) of Manufacturing overhead	$200,000.00	-$300,000.00	-$100,000.00