Problem 20-4A Department D E K Department D E K Manufacturing Costs Manufacturin
ID: 2480906 • Letter: P
Question
Problem 20-4A
Department
D
E
K
Department
D
E
K
Manufacturing Costs
Manufacturing Overhead
Problem 20-4A
Agassi Company uses a job order cost system in each of its three manufacturing departments. Manufacturing overhead is applied to jobs on the basis of direct labor cost in Department D, direct labor hours in Department E, and machine hours in Department K.In establishing the predetermined overhead rates for 2017, the following estimates were made for the year.
Department
D
E
K
Manufacturing overhead $1,200,000 $1,500,000 $900,000 Direct labor costs $1,500,000 $1,250,000 $450,000 Direct labor hours 100,000 125,000 40,000 Machine hours 400,000 500,000 120,000During January, the job cost sheets showed the following costs and production data.
Department
D
E
K
Direct materials used $140,000 $126,000 $78,000 Direct labor costs $120,000 $110,000 $37,500 Manufacturing overhead incurred $99,000 $124,000 $79,000 Direct labor hours 8,000 11,000 3,500 Machine hours 34,000 45,000 10,400Explanation / Answer
1)
Department D = Manufacturing overhead / Direct labor costs
=$1,200,000 / $1,500,000
=80%
Department E= Manufacturing overhead / Direct labor hours
= $1,500,000 /125,000
=$12
Department K = Manufacturing overhead / Machine hours
$900,000 /120,000
=$7.50
___________________________________________________________________________
Total manufacturing costs assigned to jobs in January
Department D =$120,000 * 80/100=$96,000 +$120,000+$140,000=$356,000
Department E=11,000 hours* $12=$132,000+110,000+ $126,000=$368,000
Department K 10,400*$7.50=$78,000+$37,500+$78,000=$193,500
______________________________________________________________________
Department D =Estimates -Actual
=$356,000 - $359,000 ($140,000 +$120,000+$99,000)
Under applied By $3,000
Department E=Estimates -Actual
$368,000 - $360,000 (126,000+124,000+110,000)
=Overapplied by $8,000
Department K =Estimates -Actual
=$193,500 - $194500($78,000+$$79,000+37500)
=$1,000 under applied
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