Armidale Innovations manufactures specialised Rest Chairs and operate under two

Question

Armidale Innovations manufactures specialised Rest Chairs and operate under two departments, Manufacturing and Packaging. Packaging department also does all order dispatches as well. The company uses direct labour cost as a cost allocation base for to allocate all indirect (manufacturing overhead) costs in the Manufacturing department and uses machine hours in the Packaging department for the purpose. Armidale Innovations 2016 books reveal the following information: Budgeted data/information:

Manufacturing                             Packaging

Direct labor cost $187,000            $172,000

Factory overhead $232,000            $187,000

Machine-hours 58,000mh            47,000 mh

Actual data/information for Job 19:

Manufacturing                                        Packaging

Direct materials requisitioned $17,000      $23,000

Direct labor cost $18,000                           $21,000

Machine-hours 12,000 mh                   10,000 mh

Required: Your manager has asked for the following information to be provided to him/her :

a.Factory/manufacturing overhead rate (budgeted) for the Manufacturing department (round to 3 decimal places).

b.Factory/manufacturing overhead rate (budgeted) for the Packaging department (round to 3 decimal places).

c.Total factory/manufacturing overhead cost for Job 19 (Round to 2 decimal places).

d.Per unit/Rest Chair cost for Job 19, an order by Tamworth Manufacturing for 57 Arm Chairs.

Explanation / Answer

a) Manufacturing overhead rate for the manufacturing department = Total Manufcaturing overhead/Direct labor cost

= $232,000/$187,000 = $1.241 per one dollar of labor cost

b) Manufacturing overhead rate for the packaging department = Total Manufcaturing overhead/Machine hours

= $187,000/47,000 = $3.979 per machine hour

c) Calculation of total manufacturing overhead cost for job 19 (Amount in $)

d) Calcualtion of per unit cost for job 19 (Amount in $)

Manufacturing overhead for manufacturing department ($18,000*$1.241) 22,338 Manufacturing overhead for packaging department (10,000 mh*$3.979) 39,790 Total manufacturing overhead 62,128

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