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Q 4 Abdulkarim Company is using job costing system. The allocation base for overhead is number...

Q 4 Abdulkarim Company is using job costing system. The allocation base for overhead is number of machine hours. The company uses normal costing to compute the overhead allocation rate.

The following data are available for 2017 year:

Estimated total overhead cost                                 $270,000

Estimated total number of machine-hours                 200,000

Actual total overhead cost                                       $290,000

Actual total number of machine-hours                      220,000

            Job 630 used 14, 000 machine hours.

            The company had job 630 and other jobs during the year.

                               

a.   Calculate the estimated overhead allocation rate.

b.   Compute the overhead allocated to job 630.

c.   Calculate total allocated overhead and analyze the value of allocated overhead.

d.   Explain the Concept of Job Costing?

Solutions

Expert Solution

a)

Estimated overhead allocation rate = Estimated total overhead cost /Estimated total number of machine-hours

= $270000/200000 = $1.35

b)

The overhead allocated to job 630 (estimated) = $1.35*14000 = 18900

c)

Total allocated overhead (Actual) = Actual total overhead cost/Actual total number of machine-hours *(Machine hours used by Job 360)

= 290000/220000 * 14000 = $18454.55

Actual overhead allocated to job 360 is $18454.55 and estimated overhead allocated to job 360 is 18900. It means that there is under application of overhead as per estimation.

d)

Job Costing is also termed as Terminal Costing or Specific Order Costing. Job costing is a type of costing method in which there are specific orders or contracts and the work consists of separated contracts, batches and jobs.

Under this method, for each job or project the costs are collected and accumulated. The cost for each job is analyzed separately. For each job, a job card is prepared for the accumulated costs.

ekkarill92 answered 1 year ago
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