Question

Assume that manufacturing overhead for Goldratt Company consisted of the following activities and costs:

Setup (1,000 setup hours)	$168,000
Production scheduling (400 batches)	50,000
Production engineering (60 change orders)	150,000
Supervision (2,000 direct labor hours)	64,000
Machine maintenance (12,000 machine hours)	108,000
Total activity costs	$540,000

The following additional data were provided for Job 845:

Direct materials costs	$7,000
Direct labor cost (5 Milling direct labor hours;35 Finishing direct labor hours)	$1,000
Setup hours	5 hours
Production scheduling	1 batch
Machine hours used (25 Milling machine hours;5 Finishing machine hours)	30 hours
Production engineering	3 change orders

(b) Calculate the cost of Job 845 using ABC to assign the overhead costs.
$Answer

(c) Calculate the cost of Job 845 using the plantwide overhead rate based on machine hours. (Round your answer to the nearest dollar.)
$Answer

(d) Calculate the cost of Job 845 using a machine hour departmental overhead rate for the Milling Department ($42 per hour) and a direct hour overhead rate for the Finishing Department ($108 per hour). (Round your answer to the nearest dollar.)
$Answer

Answer 1

Activity	Cost	Cost Driver	Quantity	Cost per cost driver
Setup	$             168,000.00	Setup hours	1000	$            168.00
Production scheduling	$                50,000.00	batches	400	$            125.00
Production engineering	$             150,000.00	change orders	60	$        2,500.00
Supervision	$                64,000.00	direct labor hours	2000	$              32.00
Machine Maintenance	$             108,000.00	machine hours	12000	$                9.00
Total	$             540,000.00

b.

	Job 845
Overhead allocated
Setup	$                      840.00	=5*168
Production scheduling	$                      125.00	=1*125
Production engineering	$                  7,500.00	=3*2500
Supervision	$                  1,280.00	=40*32
Machine Maintenance	$                      270.00	=30*9
Total Manufacturing Overhead	$                10,015.00
Direct Material	$                  7,000.00
Direct Labor	$                  1,000.00
Total Cost	$                18,015.00

c. Plantwide overhead rate = $540000/12000 = $45 per machine hour

	Job 845
Total Manufacturing Overhead	$                  1,350.00
Direct Material	$                  7,000.00
Direct Labor	$                  1,000.00
Total Cost	$                  9,350.00

d.

	Job 845
Overhead allocated
Milling Department	$                  1,050.00	=25*42
Finishing Department	$                  3,780.00	=35*108
Total Manufacturing Overhead	$                  4,830.00
Direct Material	$                  7,000.00
Direct Labor	$                  1,000.00
Total Cost	$                12,830.00