Question

Job FB69 at NW Fab, required 8 kg of direct materials at 16 € per kg and 5 direct labor hours at €15 per hour. Job FB69 represents 4 units completed.

Data concerning overhead (indirect costs) are the following:

Cost center	Normal cost	Actual cost	Allocat° base (AB)	Normal # of AB units	Actual # of AB units
Purchasing	150,000	166,000	kg purchased	15,000	16,125
Manufacturing	400,000	378,000	Direct labour hour	20,000	18,500
Selling	120,000	121,000	Units solds	20,000	21,000
Administration	200,000	212,000	€ of COGS	4,400,000	4,633,200

1. What would be recorded as the normal cost of job FB69?

2. What would be recorded as the actual cost of job FB69?

3. Calculate the valiance for job FB69 and interpret it!

4. Calculate the selling price of the job if NW Fab requires 12% of ROS, comment on your results!

Answer 1

1. Normal cost of Job FB69:
Particular	Amount
Direct material (4units * 8kg * 16 )	$512.00
Direct Labour (4 units * 5hours * 15 - 300)	$300.00
Overhead costs:
Purchasing (150000/15000)*4	$40.00
Manufacturing (400000/20000)*4	$80.00
Selling - (120000/20000)*4	$24.00
Adminstration - (200000/20000)*4	$40.00
Total Normal Cost of Job	$996.00

2. Actual cost of Job FB69:
Particular	Amount
Direct material ( 4units * 8kg * 16 )	$512.00
Direct Labour (4 units * 5hours * 15)	$300.00
Overhead costs:
Purchasing - (166000/16125)*4	$41.00
Manufacturing - (378000/18500)*4	$81.73
Selling - (121000/21000)*4	$23.00
Adminstration - (212000/21000)*4	$40.40
Total normal cost for 4 units	$998.13

3. Variance ($996-998.13)

2.13 Unfavourable

4. Selling Price :
Total cogs@88% - 4633200	$4,633,200.00
(+) Profit@12% (4633200*12/88)	$631,800.00
Total sales	$5,265,000.00
No. of units sold	21,000.00
Selling price per unit	$250.71