ABC Company operates two service departments, quality control and maintenance, and two production departments, cutting and...

ABC Company operates two service departments, quality control and
maintenance, and two production departments, cutting and finishing.
Service department costs are allocated to production departments
using a sequential two-stage allocation method. Quality control
department costs are allocated on the basis of number of inspections
and maintenance department costs are allocated on the basis of
machine hours. In the second stage, departmental overhead rates for
the two production departments are calculated using direct labor
hours as the activity for each department. Information for the four
departments is given below:

                             Q.C.   Maintenance    Cutting   Finishing
Directly trace overhead   $142,000   $240,000     $316,800   $339,600  
Number of inspections        5,000      5,000       14,000      6,000
Machine hours               50,000     20,000       22,000     28,000
Direct labor hours            N/A        N/A        20,000     10,000

The company has just completed job #603, which required 20 direct labor
hours in the cutting department and 50 direct labor hours in the finishing
department. The direct material and direct labor cost for job #603 totaled
$1,840. Job #603 consisted of a total of 100 units. 70 of those units were
sold to a customer. ABC Company sets the selling prices of its products at
150% of manufacturing cost.

Calculate the amount of gross profit ABC Company earned on the sale of the
70 units from job #603.

Solutions

Expert Solution

Solution:

From	Service Department Cost Allocation - Sequential alloction (Allocation of quality control first)
	Service Department		Production Departments
	QC	Maintenance	Cutting	Finishing
Direct charges of department	$142,000.00	$240,000.00	$316,800.00	$339,600.00
Quality Control (5:14:6)	-$142,000.00	$28,400.00	$79,520.00	$34,080.00
Maintenance (22:28)		-$268,400.00	$118,096.00	$150,304.00
Total	$0.00	$0.00	$514,416.00	$523,984.00

Computation of departmental overhead rate
Particulars	Cutting	Finishing
Allocated overhead	$514,416.00	$523,984.00
Estimated direct labor hours	20000	10000

Overhead rate per direct labor hour	$25.72	$52.40

Computation of expected cost and cost per unit of Job 603
Particulars	Amount
Direct material and labor	$1,840.00
Overhead - Cutting (20*$25.72)	$514.40
Overhead - Finishing (50*$52.40)	$2,620.00

Total job cost	$4,974.40
Nos of units	100
Cost per unit	$49.74

Selling price per unit -Job 603
Particulars	Amount
Cost per unit	$49.74
Markup (50%)	$24.87
Selling price	$74.62

Gross Profit - Job 603
Particulars	Amount
Sales (70*$74.62)	$5,223.40
Cost (70*$49.74)	$3,481.80
Gross Profit	$1,741.60

ekkarill92 answered 10 months ago

Next > < Previous

Related Solutions

Av-Y6 Company operates three service departments, administration, maintenance, and personnel and two production departments, assembly and...

Av-Y6 Company operates three service departments, administration, maintenance, and personnel and two production departments, assembly and packaging. Information for the three service departments is given below: Admin Maint Person Directly traced overhead $68,000 $46,000 $77,000 Square feet occupied 2,000 3,500 3,000 Number of employees 36 24 30 Maintenance hours 2,500 2,000 4,000 Information for the two production departments is given below: Assembly Packaging Directly traced overhead $167,060 $120,090 Square feet occupied 2,100 1,400 Number of employees 42 18 Maintenance hours...

Av-Y6 Company operates three service departments, administration, maintenance, and personnel and two production departments, assembly and...

Av-Y6 Company operates three service departments, administration, maintenance, and personnel and two production departments, assembly and packaging. Information for the three service departments is given below: Admin Maint Person Directly traced overhead $65,000 $33,000 $74,000 Square feet occupied 2,000 3,500 3,000 Number of employees 42 24 30 Maintenance hours 2,500 2,000 4,000 Information for the two production departments is given below: Assembly Packaging Directly traced overhead $167,030 $114,090 Square feet occupied 2,100 1,400 Number of employees 36 18 Maintenance hours...

Av-Y6 Company operates three service departments, administration, maintenance, and personnel and two production departments, assembly and...

Alpha Manufacturing Corporation has two service departments, Custodial Services and Maintenance, and three production departments, Cutting,...

Alpha Manufacturing Corporation has two service departments, Custodial Services and Maintenance, and three production departments, Cutting, Milling, and Assembly. The company allocates the cost of Custodial Services on the basis of square footage and Maintenance on the basis of labor-hours. No distinction is made between variable and fixed costs. Budgeted operating data for the year just completed follow: Service Departments Production Departments Custodial Services Maintenance Cutting Milling Assembly Budgeted costs before allocation $69,000 $57,000 $165,000 $120,000 $180,000 Square feet 47,000...

The Merchant Manufacturing Company has two service departments — purchasing and maintenance, and two production departments...

The Merchant Manufacturing Company has two service departments — purchasing and maintenance, and two production departments — fabrication and assembly. The distribution of each service department's efforts to the other departments is shown below: FROM TO Purchasing Maintenance Fabrication Assembly Purchasing 0 % 15 % 75 % 10 % Maintenance 55 % 0 % 35 % 10 % The direct operating costs of the departments (including both variable and fixed costs) were as follows: Purchasing $ 156,000 Maintenance 78,000 Fabrication...

Bradford Company has two service departments, Human Resources and Janitorial, and two production departments, Cutting and...

Bradford Company has two service departments, Human Resources and Janitorial, and two production departments, Cutting and Glazing. The following data have been estimated for next year’s operations: Department: Direct Charges Number of Employees Square Footage Human Resources $360,000 6 15,000 Janitorial $280,000 8 20,000 Cutting $428,000 42 25,000 Glazing $562,000 40 35,000 Requirements: (1) Distribute the service department costs using the sequential distribution method. Distribute the Human Resources Department first. (24 points/3 points each) (2) Prepare the journal entries to...

1). The Merchant Manufacturing Company has two service departments — purchasing and maintenance, and two production...

1). The Merchant Manufacturing Company has two service departments — purchasing and maintenance, and two production departments — fabrication and assembly. The distribution of each service department's efforts to the other departments is shown below: FROM TO Purchasing Maintenance Fabrication Assembly Purchasing 0 % 60 % 30 % 10 % Maintenance 40 % 0 % 45 % 15 % The direct operating costs of the departments (including both variable and fixed costs) were as follows: Purchasing $ 129,000 Maintenance 51,000...

a. Caro Manufacturing has two production departments, Machining and Assembly, and two service departments, Maintenance and...

a. Caro Manufacturing has two production departments, Machining and Assembly, and two service departments, Maintenance and Cafeteria. Direct costs for each department and the proportion of service costs used by the various departments for the month of August follow: Proportion of Services Used by Department Direct Costs Maintenance Cafeteria Machining Assembly Machining $ 98,000 Assembly 74,400 Maintenance 46,000 — 0.2 0.6 0.2 Cafeteria 37,000 0.6 — 0.1 0.3 Exercise 11-27 (Algo) Cost Allocation: Direct Method (LO 11-2) Required: Compute the...

Annapolis Company has two service departments (Computer Operations & Maintenance Services). Annapolis has two production departments...

Annapolis Company has two service departments (Computer Operations & Maintenance Services). Annapolis has two production departments (Mixing Department & Packaging Department.) Annapolis uses a step allocation method where the Computer Operations Department is allocated to all departments and Maintenance Services is allocated to the production departments. All allocations are based on total employees. Computer Operations has costs of $160,000 and Maintenance Services has costs of $165,000 before any allocations. What amount of Maintenance Services total cost is allocated to the Mixing...

Annapolis Company has two service departments (Computer Operations & Maintenance Services). Annapolis has two production departments...

Annapolis Company has two service departments (Computer Operations & Maintenance Services). Annapolis has two production departments (Mixing Department & Packaging Department.) Annapolis uses a step allocation method where the Computer Operations Department is allocated to all departments and Maintenance Services is allocated to the production departments. All allocations are based on total employees. Computer Operations has costs of $185,000 and Maintenance Services has costs of $185,000 before any allocations. What amount of Maintenance Services total cost is allocated to the...

Subjects