The Solomon Company uses a job costing system at its Dover, Delaware plant. The

Question

The Solomon Company uses a job costing system at its Dover, Delaware plant. The plant has a machining department. Its job costing system has two direct cost categories (direct materials and direct manufacturing labour) and two manufacturing overhead cost pools (the machining department, allocated using machine hours and the finishing department, allocated using manufacturing labour costs). The 2002 budget for the plant is

                                                              Machining Dept.                                       Finishing Dept.

Manufacturing overhead                                            $10,000,000                                                        $8,000,000          

Direct manufacturing labour cost                              $900,000                                                              $4,000,000

Direct Manufacturing labour hours                          30,000                                                                   160,000

What is the budgeted overhead rate that should be used in the machining department? In the finishing department?

During the month of January, the cost record for job 431 shows the following:

                                                                                    Machining department                             Finishing Dept.                                                                                                                                                                                                                 

Direct materials used                                                     $14000                                   $3000

Direct manufacturing labour costs                            $600                                             $1250

Direct manufacturing labour hours                          30                                                  50

Machine hours                                                                  130                                          10

What is the total manufacturing overhead allocated to job 431?

Assume that job 431 consisted of 20 units of product, what is the unit product cost?

Balances at the end of 2002 are as follows:

Machining Dept.Finishing Dept.

Manufacturing overhead incurred $11,200,000$7,900,000

Direct manufacturing labour costs$950,000$4,100,000

Machine hours220,00032,000

Compute the manufacturing overhead variance for each department and for the Dover plant as a whole.

Explanation / Answer

1 Budgeted overhead Rate: Machining Finishing Budgeted Overhead 10000000 8000000 Overhead allocation based on: Machine Hours 200000 (Machine hour skipped in question, hence taken on assumption basis 200000) Direct Labor Cost 4000000 Overhead Rate (Budgeted Ovehread/Machine hour or Direct Labor cost) 50 Per Machine Hour 200% of Direct Labor Cost 2 Overhead allocated to Job 431: Machining Machine Hour*Rate 130*50=6500 Finishing Direct Labor Cost*Rate 1250*200%=2500 Total Overhead Allocated 6500+2500 9000 3 Unit Product Cost: Machining Finising Total Direct Material 14000 3000 17000 Direct Labor 600 1250 1850 Overhead (From Part-2) 6500 2500 9000 Total Cost 27850 Units Prodcuted 20 Unit Cost 27850/20 1392.5 4 Machining Finishing Budgeted Overhead 10000000 8000000 Overhead Incurred 11200000 7900000 Budgeted Machine Hour 200000 Labor Cost 4000000 Actrual Machine Hour 220000 Labor Cost 4100000 Budgeted Overhead Per Unit 50 2 Actual Overhread Per unit                                           51                                             1.93 Variance: Direct Ovh Rate Variance (50-51)*220000 (2.00-1.93)*4100000 (SP-AP)*AQ 220000 Un 287000 F Direct OVH Efficiency Variance (200000-220000)*50 (4000000-4100000)*2 (SQ-AQ)*SP 1000000 Un 200000 Un

Related Questions

Navigate

• Browse (All)
• Browse T
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.