Highland Co. is a job-order-costing company that uses activity-based costing to

Question

Highland Co. is a job-order-costing company that uses activity-based costing to apply overhead jobs. The following overhead activities were budgeted for the year. 1. Activity CostDriver Amount of driver setups purchasing other overhead $120,000 $80,000 $150,000 number of setups number of parts direct labor hours 6,000 20,000 75,000 The following information about the jobs was given for January. Job 1001 Job 1002 Job 1003 Job 1004 alance 1/1 irect materials irect labor umber of setups $44,900 $54,000 $80,000 $60,700 S0 $0 40 300 5,000 2,000 $37,000$25,000 $41,000 $38,500$43,000 $71,000 200 500 1,200 1,800 10 180 2,400 1,500 30 400 5,200 number of parts irect labor hours Units 800 By January 31, Jobs 1001 and 1004 were completed and only Job 1004 was sold. The remaining were still in process. (1) Calculate three activity rates. (2) Calculate the overhead cost per unit for Job 1004. (3) Determine the cost per unit for Jobs 1001 and 1004 (4) Calculate the beginning balance and ending balance of work-in-process for January. (5) Determine the cost of goods manufactured. (6) Calculate the cost of goods sold. (7) Prepare all necessary journal entries pertaining Job 1001, Job 1002, Job 1003, and Job 1004

Explanation / Answer

Solution 1:

Solution 2:

Overhead cost per unit for Job 1004 = Allocated overhead / Nos of units = $8,400 / 1800 = $4.67 per unit

Solution 3:

Solution 4:

Beginning balance of WIP = $44,900+ $60,700 = $105,600

Therefore cost of ending WIP = $222,520

Solution 5:

Cost of goods manufactured = Cost of job 1001 + Cost of job 1004

$190,900 + $120,400 = $311,300

Solution 6:

Cost of goods sold = Cost of job 1004 = $120,400

Determination of activity rate for each activity & allocation of overhead Activity Estimated Overhead Cost Activity Base Usage of Activity Base Activity Rate Setups $120,000.00 Nos of Setup 6000 $20.00 Purchasing $80,000.00 Nos of parts 20000 $4.00 Other Overhead $150,000.00 Direct labor hours 75000 $2.00

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