Question

Lamour Corporation is a job order costing company that uses activity-based costing to apply overhead to jobs. The following overhead activities were budgeted for the year.

Activity	Cost	Driver	Amount of driver
Setups	$240,000	Number of setups	6,000
Purchasing	160,000	Number of parts	20,000
Other overhead	300,000	Direct labor hours	80,000

The following information about the jobs was given for April.

	Job 101	Job 102	Job 103	Job 104
Balance 4/1	$64,900	$40,770	$30,500	0
Direct materials	54,000	37,900	25,000	11,000
Direct labor	80,000	38,500	43,000	21,000
Number of setups	40	10	30	200
Number of parts	300	80	400	500
Direct labor hours	5,000	2,400	5,200	1,200

By April 30, Jobs 102 and 103 were completed and sold. The remaining jobs were still in process.
What is the cost of goods manufactured?

a.$ 249,610

b.$ 178,340

c.$ 215,670

d.$ 144,400

Answer 1

Lamour Corporation

Determination of cost of goods manufactured:

The correct option is a. $249,610

Computations and Explanation:

Jobs 102 and 103 were completed and sold. Hence, the cost of goods manufactured comprises the cost of goods manufactured of Jobs 102 and 103.

	Cost of Goods Manufactured:
	Job 102	Job 103	Total
Balance 4/1	$40,770	$30,500	$71,270
Direct Materials	$37,900	$25,000	$62,900
Direct Labor	$38,500	$43,000	$81,500
Assigned Overhead	$10,040	$23,900	$33,940
Cost of Goods Manufactured	$127,210	$122,400	$249,610

Since jobs 101 and 104 are still in process, the amount of ending work in process is needed to compute the cost of goods manufactured and so, these costs are excluded from the computation of cost of goods manufactured.

Determination of overhead applied to each job:

Step 1-

computation of activity rate:
Activity	Cost	driver	amount of driver	activity rate
Setups	$240,000	number of setups	6,000	$40 per setup
Purchasing	$160,000	number of parts	20,000	$8 per part
Other overhead	$300,000	direct labor hours	80,000	$3.75 per DLH

Step 2 – overhead assigned to each job:

	Job 101
Activity	Activity Driver	Activity Usage	Activity Rate	Activity cost applied
Setups	number of setups	40	$40 per setup	$1,600
Purchasing	number of parts	300	$8 per part	$2,400
Other Overhead	Direct labor hours	5,000	$3.75 per DLH	$18,750
Total overhead				$22,750

	Job 102
Activity	Activity Driver	Activity Usage	Activity Rate	Activity cost applied
Setups	number of setups	10	$40 per setup	$400
Purchasing	number of parts	80	$8 per part	$640
Other Overhead	Direct labor hours	2,400	$3.75 per DLH	$9,000
Total overhead				$10,040

	Job 103
Activity	Activity Driver	Activity Usage	Activity Rate	Activity cost applied
Setups	number of setups	30	$40 per setup	$1,200
Purchasing	number of parts	400	$8 per part	$3,200
Other Overhead	Direct labor hours	5,200	$3.75 per DLH	$19,500
Total overhead				$23,900

	Job 104
Activity	Activity Driver	Activity Usage	Activity Rate	Activity cost applied
Setups	number of setups	200	$40 per setup	$8,000
Purchasing	number of parts	500	$8 per part	$4,000
Other Overhead	Direct labor hours	1,200	$3.75 per DLH	$4,500
Total overhead				$16,500