Question

Dillon Products manufactures various machined parts to customer specifications. The company uses a job-order costing system and applies overhead costs to jobs on the basis of machine-hours. At the beginning of the year, the company used a cost formula to estimate that it would incur $4,200,000 in manufacturing overhead cost at an activity level of 560,000 machine-hours.

The company spent the entire month of January working on a large order for 8,600 custom made machined parts. The company had no work in process at the beginning of January. Cost data relating to January follow:

  

a.	Raw materials requisitioned for production, $256,000 (80% direct and 20% indirect).
b.	Labor cost incurred in the factory, $168,000, of which $56,000 was direct labor and $112,000 was indirect labor.
c.	Depreciation recorded on factory equipment, $62,000.
d.	Other manufacturing overhead costs incurred, $85,300 (credit Accounts Payable).
e.	Manufacturing overhead cost was applied to production on the basis of 40,520 machine-hours actually worked during the month.
f.	The completed job was moved into the finished goods warehouse on January 31 to await delivery to the customer. (In computing the dollar amount for this entry, remember that the cost of a completed job consists of direct materials, direct labor, and applied overhead.)

  

Required:
1.	Calculate the Actual Manufacturing Overhead Costs Incurred.

      

  

2.	Compute the amount of Manufacturing Overhead Applied to Production.

      

  

3.	Calculate the total Manufacturing Cost for the job completed in January.

      

  

4.	Compute the unit product cost that will appear on the job cost sheet. (Do not round intermediate calculations. Round your answer to 2 decimal places.)

Answer 1

Computation of Actual Manufacturing Overhead Incurred
Particulars	Total	% of Indirect	Amount $
Raw Materials	2,56,000	20	51,200
Labour Cost	1,68,000	-	1,12,000
Depreciation	62,000	-	62,000
Other Manufaturing Overheads	85,300	-	85,300
Total			3,10,500

The amount of Manufacturing Overhead Applied to Production
Total Manufaturing Overheads	(a)	42,00,000
Total Machinery hours	(b)	5,60,000
Per hour Manufacturing OH	a/b	7.50
Total Machinery hours actually spent	( c )	40,520
Manufacturing Overhead to be applied	(40520 * 7.5 )	3,03,900

Total Manufacturing cost
Particulars	Amount $
Raw Materials	2,04,800
Direct Labiur Cost	56,000
Manufacturing Over heads	3,03,900
Total	5,64,700

Unit Production Cost on Job sheet
Particulars	Amount $
Total Costs	5,64,700
Total Units	8600
Unit Product Cost (564,700 / 8,600	65.66