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Job Costs Using Activity-Based Costing

Heitger Company is a job-order costing firm that uses activity-based costing to apply overhead to jobs. Heitger identified three overhead activities and related drivers. Budgeted information for the year is as follows:

Activity	Cost		Driver	Amount of Driver
Materials handling	$60,250		Number of moves	2,500
Engineering	166,000		Number of change orders	10,000
Other overhead	307,800		Direct labor hours	54,000

Heitger worked on four jobs in July. Data are as follows:

	Job 13-43		Job 13-44		Job 13-45		Job 13-46
Beginning balance	$20,800		$18,100		$2,600		$0
Direct materials	$6,300		$9,050		$14,100		$9,900
Direct labor cost	$840		$1,100		$1,700		$110

	Job 13-43		Job 13-44		Job 13-45		Job 13-46
Number of moves	47		51		30		4
Number of change orders	31		42		15		20
Direct labor hours	840		1,100		1,700		110

By July 31, Jobs 13-43 and 13-44 were completed and sold. Jobs 13-45 and 13-46 were still in process.

Required:

1. Calculate the activity rates for each of the three overhead activities. Round all activity rates to the nearest cent.

Materials handling rate	$ per move
Engineering rate	$ per change order
Other overhead rate	$ per direct labor hour

2. Prepare job-order cost sheets for each job showing all costs through July 31.

When required, round your answers to the nearest dollar. If an amount is zero, enter "0".

Heitger Company
Job-Order Cost Sheets
	Job 13-43	Job 13-44	Job 13-45	Job 13-46
Balance, July 1	$	$	$	$
Direct materials	$	$	$	$
Direct labor cost	$	$	$	$
Materials handling	$	$	$	$
Engineering	$	$	$	$
Other overhead	$	$	$	$
Total	$	$	$	$

3. Calculate the balance in Work in Process on July 31.
$

4. Calculate the cost of goods sold for July.
$

5. What if Job 13-46 required no engineering change orders? What is the difference in the new cost of Job 13-46?

$   

Answer 1

Computation of Activity rate
Activity cost pool	Activity Measure	Estimated overhead cost	Expected activity	Activity rate of activity cost pool
Material Handling	No. of Moves	$60,250.00	2500	$24.10	Per Move
Engineering	No. of Change Order	$166,000.00	10000	$16.60	Per Change
Other Overhead	Direct Labour Hours	$307,800.00	54000	$5.70	Per Hour
		$288,000.00
						Heitger Company
Job order Cost Sheet
	job13-43	Job-13-44	Job13-45	Job13-46
Beg Balance	$20,800.00	$18,100.00	$2,600.00	$0.00
Direct Material	$6,300.00	$9,050.00	$14,100.00	$9,900.00
Direct Labour Cost	$840.00	$1,100.00	$1,700.00	$110.00
Material Handling	$1,132.70	$1,229.10	$723.00	$96.40
Engineering	$514.60	$697.20	$249.00	$332.00
Other Overhead	$4,788.00	$6,270.00	$9,690.00	$627.00
Total	$34,375.30	$36,446.30	$29,062.00	$11,065.40
					Working Note: Calculation of Activity Cost.
	job13-43	Job-13-44	Job13-45	Job13-46
No. of Move	47	51	30	4
Material Handling Cost @$24.10 Per Move	$1,132.70	$1,229.10	$723.00	$96.40
No. of Change Order	31	42	15	20
Engineering Cost @$16.60/ Change	$514.60	$697.20	$249.00	$332.00
Direct Labour Hours	840	1100	1700	110
Other Overhead @$5.70/Hour	$4,788.00	$6,270.00	$9,690.00	$627.00
Computation of Cost of Goods Sold			Computation of WIP
Cost for Job-13-43	$34,375.00		Cost for Job-13-45	$29,062.00
Cost for Job 13-44	$36,446.30		Cost for Job 13-46	$11,065.00
Cost of Goods Sold	$70,821.30		Cost of Goods Sold	$40,127.00