# Managerial Accounting: Ch.2 Job Order Costing

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Fickel Company has two manufacturing departments—Assembly and Testing & Packaging. The predetermined overhead rates in Assembly and Testing & Packaging are $25.00 per direct labor-hour and$21.00 per direct labor-hour, respectively. The company’s direct labor wage rate is $27.00 per hour. The following information pertains to Job N-60: Assembly Testing & Packaging Direct materials$ 405 $51 Direct labor$ 297 $54 Required: 1. What is the total manufacturing cost assigned to Job N-60? (Do not round intermediate calculations.) 2. If Job N-60 consists of 10 units, what is the unit product cost for this job? (Do not round intermediate calculations. Round your answer to 2 decimal places.) Solution Total manufacturing cost 1,124 Unit product cost 112.40 per unit วิธีคิด The total direct labor-hours required for Job N-60: Assembly Testing & Packaging Direct labor cost (a) 297 54 Direct labor wage rate per hour (b) 27 27 Total direct labor hours (a) ÷ (b) 11 2 The total manufacturing cost and unit product cost for Job N-60 is computed as follows:  Direct materials ($405 + $51) 456 Direct labor ($297 + $54) 351 Assembly Department ($25 per DLH × 11 DLHs) 275.00 Testing & Packaging Department ($21 per DLH × 2 DLHs) 42.00 317 Total manufacturing cost 1,124 Total manufacturing cost (a) 1,124 Number of units in the job (b) 10 Unit product cost (a) ÷ (b) 112.40 Tech Solutions is a consulting firm that uses a job-order costing system. Its direct materials consist of hardware and software that it purchases and installs on behalf of its clients. The firm’s direct labor includes salaries of consultants that work at the client’s job site, and its overhead consists of costs such as depreciation, utilities, and insurance related to the office headquarters as well as the office supplies that are consumed serving clients. Tech Solutions computes its predetermined overhead rate annually on the basis of direct labor-hours. At the beginning of the year, it estimated that 77,500 direct labor-hours would be required for the period’s estimated level of client service. The company also estimated$775,000 of fixed overhead cost for the coming period and variable overhead of $0.50 per direct labor-hour. The firm’s actual overhead cost for the year was$789,800 and its actual total direct labor was 83,350 hours.

Required:

1. Compute the predetermined overhead rate.
2. During the year, Tech Solutions started and completed the Xavier Company engagement. The following information was available with respect to this job:
 Direct materials 52,950 Direct labor cost 30,500 Direct labor-hours worked 320

Compute the total job cost for the Xavier Company engagement.

Solution

 Predetermined overhead rate $10.50 per DLH วิธีคิด The estimated total overhead cost is computed as follows: $$Y = 775{,}000 + (0.50 \text{ per DLH})(77{,}500 \text{ DLHs})$$  Estimated fixed overhead cost 775,000 Estimated variable overhead cost:$0.50 per DLH × 77,500 38,750 Estimated total overhead cost 813,750

The predetermined overhead rate is computed as follows:

 Estimated total overhead (a) 813,750 Estimated total direct labor-hours (b) 77,500 DLHs Predetermined overhead rate (a) ÷ (b) 10.50 per DLH
2. Compute the total job cost for the Xavier Company engagement. (Round your intermediate calculations to 2 decimal places.)
 Direct materials 52,950 Direct labor cost 30,500 Direct labor-hours worked 3,360 Total manufacturing cost 86,810

วิธีคิด
Total job cost = direct materials + direct labor + overhead applied
ซึ่งโจทย์ให้ direct materials และ direct labor มาแล้ว แต่ไม่ได้ให้ overhead applied

\begin{align*} \text{Overhead applied} &= \text{predetermined overhead rate} \times {activity} \\[6pt] &= \text{predetermined overhead rate} \times \text{direct labor-hours worked} \\[6pt] &= 10.5 \text{ per DLH} \times 320 \text{ DLHs} \\[6pt] &= 3{,}360 \end{align*}
Taveras Corporation is currently operating at 50% of its available manufacturing capacity. It uses a job-order costing system with a plantwide predetermined overhead rate based on machine-hours. At the beginning of the year, the company made the following estimates:

Machine-hours required to support estimated production 250,000
Variable manufacturing overhead cost per machine-hour 2.00

Required:

1. Compute the plantwide predetermined overhead rate.
2. During the year, Job P90 was started, completed, and sold to the customer for $4,200. The following information was available with respect to this job: Direct materials 1,932 Direct labor cost 1,386 Machine-hours used 89 Compute the total manufacturing cost assigned to Job P90. Solution 1. Compute the plantwide predetermined overhead rate.  Predetermined overhead rate 26 per MH วิธีคิด The estimated total overhead cost is computed as follows: $$Y = 6{,}000{,}000 + (2 \text{ per MH})(250{,}000 \text{MHs})$$  Estimated fixed overhead 6,000,000 Estimated variable overhead:$2 per MH × 250,000 MHs 500,000 Estimated total overhead cost 6,500,000

The plantwide predetermined overhead rate is computed as follows:

 Estimated total overhead (a) 6,500,000 Estimated total machine-hours (b) 250,000 MHs Predetermined overhead rate (a) ÷ (b) 26 per MH

2. Compute the total manufacturing cost assigned to Job P90.
Direct materials 1,932
Direct labor 1,386
Total manufacturing cost 5,632
วิธีคิด
เราหา total manufacturing cost สำหรับ Job P90 ได้จากสูตร

\begin{align*} &= \text{direct materials} + \text{direct labor} + \text{manufacturing overheads} \\[6pt] &= 1{,}932 + 1{,}386 + (\text{machine-hours used} \times \text{predetermined overhead rate}) \\[6pt] &= 1{,}932 + 1{,}386 + (89 \text{ MHs} \times 26 \text{ per MH}) \\[6pt] &= 1{,}932 + 1{,}386 + 2{,}314 \\[6pt] &= \ 5{,}632 \end{align*}

Kingsport Containers Company makes a single product that is subject to wide seasonal variations in demand. The company uses a job-order costing system and computes plantwide predetermined overhead rates on a quarterly basis using the number of units to be produced as the allocation base. Its estimated costs, by quarter, for the coming year are given below:

Quarter
First Second Third Fourth
Direct materials 240,000 120,000 60,000 180,000
Direct labor 160,000 80,000 40,000 120,000
Manufacturing overhead 240,000 216,000 204,000 ?
Total manufacturing costs (a) 640,000 416,000 304,000 ?
Number of units to be produced (b) 120,000 60,000 30,000 90,000
Estimated unit product cost (a) ÷ (b) 5.33 6.93 10.13 ?

Management finds the variation in quarterly unit product costs to be confusing. It has been suggested that the problem lies with manufacturing overhead because it is the largest element of total manufacturing cost. Accordingly, you have been asked to find a more appropriate way of assigning manufacturing overhead cost to units of product.

Required:

1. Assuming the estimated variable manufacturing overhead cost per unit is $0.40, what must be the estimated total fixed manufacturing overhead cost per quarter? 2. Assuming the assumptions about cost behavior from the first three quarters hold constant, what is the estimated unit product cost for the fourth quarter? 3. What is causing the estimated unit product cost to fluctuate from one quarter to the next? 4. Assuming the company computes one predetermined overhead rate for the year rather than computing quarterly overhead rates, calculate the unit product cost for all units produced during the year. Solution 1. Assuming the estimated variable manufacturing overhead cost per unit is$0.40, what must be the estimated total fixed manufacturing overhead cost per quarter?
วิธีคิด

The estimated total fixed manufacturing overhead can be computed using the data from any of quarters 1-3. For illustrative purposes, we’ll use the first quarter as follows:

 Total overhead cost (First quarter) 240,000 Variable cost element ($0.40 per unit × 120,000 units) 48,000 Fixed cost element 192,000 2. Assuming the assumptions about cost behavior from the first three quarters hold constant, what is the estimated unit product cost for the fourth quarter? (Do not round intermediate calculations and round the “Unit product cost” to 2 decimal places.)  Unit product cost 5.87 วิธีคิด The fixed and variable cost estimates from requirement 1 can be used to estimate the total manufacturing overhead cost for the fourth quarter as follows: $$Y = 192{,}000 + (0.40 \text{ per unit})(90{,}000 \text{ units})$$  Estimated fixed manufacturing overhead 192,000 Estimated variable manufacturing overhead$0.40 per unit × 90,000 units 36,000 Estimated total manufacturing overhead cost 228,000
The estimated unit product cost for the fourth quarter is computed as follows:

 Direct materials 180,000 Direct labor 120,000 Manufacturing overhead 228,000 Total manufacturing costs (a) 528,000 Number of units to be produced (b) 90,000 Unit product cost (rounded) (a) ÷ (b) 5.87

3. What is causing the estimated unit product cost to fluctuate from one quarter to the next?
• The fixed portion of the manufacturing overhead cost is causing the unit product costs to fluctuate. The unit product cost increases as the level of production decreases because the fixed overhead is spread over fewer units.
• The fixed portion of the manufacturing overhead cost is causing the unit product costs to fluctuate. The unit product cost decreases as the level of production decreases because the fixed overhead is spread over fewer units.
• The variable portion of the manufacturing overhead cost is causing the unit product costs to fluctuate. The unit product cost increases as the level of production decreases because the variable overhead is spread over fewer units.
• The variable portion of the manufacturing overhead cost is causing the unit product costs to fluctuate. The unit product cost decreases as the level of production decreases because the variable overhead is spread over fewer units.
4. Assuming the company computes one predetermined overhead rate for the year rather than computing quarterly overhead rates, calculate the unit product cost for all units produced during the year. (Do not round intermediate calculations and round the “Unit product cost” to 2 decimal places.)
 Unit product cost 6.29
วิธีคิด

The unit product cost can be stabilized by using a predetermined overhead rate that is based on expected activity for the entire year. The cost formula created in requirement 1 can be adapted to compute the annual predetermined overhead rate. The annual fixed manufacturing overhead is $768,000 ($192,000 per quarter × 4 quarters). The variable manufacturing overhead per unit is $0.40. The cost formula is as follows: $$Y = 768{,}000 + 0.40 \text{ per unit} × 300{,}000 \text{ units}$$  Estimated fixed manufacturing overhead 768,000 Estimated variable manufacturing overhead$0.40 per unit × 300,000 units 120,000 Estimated total manufacturing overhead cost 888,000
The annual predetermined overhead rate is computed as follows:

 Estimated total manufacturing overhead (a) 888,000 Estimated total units produced (b) 300,000 Predetermined overhead rate (a) ÷ (b) 2.96 per unit
Using a predetermined overhead rate of $2.96 per unit, the unit product costs would stabilize as shown below: Quarter First Second Third Fourth Direct materials 240,000 120,000 60,000 180,000 Direct labor 160,000 80,000 40,000 120,000 Manufacturing overhead: at$2.96 per unit 355,200 177,600 88,800 266,400
Total cost (a) 755,200 377,600 188,800 566,400
Number of units produced (b) 120,000 60,000 30,000 90,000
Unit product cost (a) ÷ (b) 6.29 6.29 6.29 6.29

Moody Corporation uses a job-order costing system with a plantwide predetermined overhead rate based on machine-hours. At the beginning of the year, the company made the following estimates:

Machine-hours required to support estimated production 152,000
Variable manufacturing overhead cost per machine-hour 4.70

Required:

1. Compute the plantwide predetermined overhead rate.
2. During the year, Job 400 was started and completed. The following information was available with respect to this job:
Direct materials 330
Direct labor cost 250
Machine-hours used 35

Compute the total manufacturing cost assigned to Job 400.

3. If Job 400 includes 50 units, what is the unit product cost for this job?
4. If Moody uses a markup percentage of 130% of its total manufacturing cost, then what selling price per unit would it have established for Job 400?

Solution

 Predetermined overhead rate 9.02 per MH
วิธีคิด

The estimated total manufacturing overhead cost is computed as follows:

$$Y = 656{,}000 + (4.70 \text{ per MH})(152{,}000 \text{ MHs})$$
 Estimated fixed manufacturing overhead 656,000 Estimated variable manufacturing overhead: $4.70 per MH × 152,000 MHs 714,400 Estimated total manufacturing overhead cost 1,370,400 The plantwide predetermined overhead rate is computed as follows:  Estimated total manufacturing overhead (a) 1,370,400 Estimated total machine-hours (b) 152,000 MHs Predetermined overhead rate (a) ÷ (b) 9.02 per MH 2. Compute the total manufacturing cost assigned to Job 400 (Round your intermediate calculations to 2 decimal places and your final answer to the nearest dollar amount.)  Total manufacturing cost 896 per MH วิธีคิด Total manufacturing cost assigned to Job 400:  Direct materials 330 Direct labor 250 Manufacturing overhead applied ($9.02 per MH × 35 MHs) 316 Total manufacturing cost 896
3. If Job 400 includes 50 units, what is the unit product cost for this job? (Round your intermediate calculations and final answer to the nearest whole dollar.)
 Unit product cost 18
วิธีคิด

The unit product cost of Job 400 is computed as follows:

 Total manufacturing cost (a) 896 Number of units in the job (b) 50 Unit product cost (a) ÷ (b) 18
4. If Moody uses a markup percentage of 130% of its total manufacturing cost, then what selling price per unit would it have established for Job 400? (Round your intermediate calculations and final answer to the nearest whole dollar.)
 Selling price per unit 41
วิธีคิด

The selling price per unit is computed as follows:

 Total manufacturing cost 896 Markup (130% of manufacturing cost) 1,164 Selling price for Job 400 (a) 2,060 Number of units in Job 400 (b) 50 Selling price per unit (a) ÷ (b) 41
White Company has two departments, Cutting and Finishing. The company uses a job-order costing system and computes a predetermined overhead rate in each department. The Cutting Department bases its rate on machine-hours, and the Finishing Department bases its rate on direct labor-hours. At the beginning of the year, the company made the following estimates:

Department
Cutting Finishing
Direct labor-hours 7,100 65,000
Machine-hours 70,000 2,600
Total fixed manufacturing overhead cost 400,000 427,000
Variable manufacturing overhead per machine-hour 2.00
Variable manufacturing overhead per direct labor-hour 3.75

Required:

1. Compute the predetermined overhead rate for each department.
2. The job cost sheet for Job 203, which was started and completed during the year, showed the following:
Department
Cutting Finishing
Direct labor-hours 6 12
Machine-hours 80 4
Direct materials 800 380
Direct labor cost 144 288
Using the predetermined overhead rates that you computed in requirement (1), compute the total manufacturing cost assigned to Job 203.
3. Would you expect substantially different amounts of overhead cost to be assigned to some jobs if the company used a plantwide predetermined overhead rate based on direct labor-hours, rather than using departmental rates?

Solution

Department
Cutting Finishing
Predetermined overhead rate $7.71 per MH$10.32 per DLH
วิธีคิด

Cutting Department:

The estimated total manufacturing overhead cost in the Cutting Department is computed as follows:

$$Y = 400{,}000 + (2.00 \text{ per MH})(70{,}000 \text{ MHs})$$
 Estimated fixed manufacturing overhead 400,000 Estimated variable manufacturing overhead $2.00 per MH × 70,000 MHs 140,000 Estimated total manufacturing overhead cost 540,000 The predetermined overhead rate is computed as follows:  Estimated total manufacturing overhead (a) 540,000 Estimated total machine-hours (b) 70,000 MHs Predetermined overhead rate (a) ÷ (b) 7.71 per MH Finishing Department: The estimated total manufacturing overhead cost in the Finishing Department is computed as follows: $$Y = 427{,}000 + (3.75 \text{ per DLH})(65{,}000 \text{ DLHs})$$  Estimated fixed manufacturing overhead 427,000 Estimated variable manufacturing overhead$3.75 per DLH × 65,000 DLHs 243,750 Estimated total manufacturing overhead cost 670,750

The predetermined overhead rate is computed as follows:

 Estimated total manufacturing overhead (a) 670,750 Estimated total direct labor-hours (b) 65,000 DLHs Predetermined overhead rate (a) ÷ (b) 10.32 per DLH

2. Using the predetermined overhead rates that you computed in requirement (1), compute the total manufacturing cost assigned to Job 203. (Round intermediate calculations to 2 decimal places and final answer to the nearest dollar amount.)
Total manufacturing cost 2,353
วิธีคิด

 Total manufacturing cost assigned to Job 203: Direct materials ($800 +$380) 1,180.00 Direct labor ($144 +$288) 432.00 Cutting Department (80 MHs × $7.71 per MH) 616.80 Finishing Department (12 DLH ×$10.32 per DLH) 123.84 740.64 Total manufacturing cost 2,352.64

3. Would you expect substantially different amounts of overhead cost to be assigned to some jobs if the company used a plantwide predetermined overhead rate based on direct labor-hours, rather than using departmental rates?
• Yes
• No

Explanation
Yes; if some jobs require a large amount of machine time and a small amount of labor time, they would be charged substantially less overhead cost if a plantwide overhead rate based on direct labor hours were used. It appears, for example, that this would be true of Job 203 which required considerable machine time to complete, but required a relatively small amount of labor hours.

Required information
[The following information applies to the questions displayed below.]

Delph Company uses a job-order costing system and has two manufacturing departments—Molding and Fabrication. The company provided the following estimates at the beginning of the year:

Molding Fabrication Total
Machine-hours 24,000 30,000 54,000
Fixed manufacturing overhead cost 780,000 300,000 1,080,000
Variable manufacturing overhead cost per machine-hour 4.00 1.00

During the year, the company had no beginning or ending inventories and it started, completed, and sold only two jobs—Job D-70 and Job C-200. It provided the following information related to those two jobs:

Job D-70 Molding Fabrication Total
Direct materials cost 370,000 320,000 690,000
Direct labor cost 240,000 140,000 380,000
Machine-hours 16,000 8,000 24,000
Job C-200 Molding Fabrication Total
Direct materials cost 260,000 280,000 540,000
Direct labor cost 140,000 300,000 440,000
Machine-hours 8,000 22,000 30,000

Required:

1. Assume Delph uses departmental predetermined overhead rates based on machine-hours.
1. Compute the departmental predetermined overhead rates.
2. Compute the total manufacturing cost assigned to Job D-70 and Job C-200.
3. If Delph establishes bid prices that are 150% of total manufacturing cost, what bid prices would it have established for Job D-70 and Job C-200?
4. What is Delph’s cost of goods sold for the year?

Solution

1. Assume Delph uses departmental predetermined overhead rates based on machine-hours. Compute the departmental predetermined overhead rates. (Round the final answers to 2 decimal places.)
Molding Department 36.50 per MH
Fabrication Department 11.00 per MH
วิธีคิด
Molding Department:

Using the equation $$Y = a + bX$$, the estimated total manufacturing overhead cost would be depicted as follows:

$$Y = 780{,}000 + (4.00 \text{ per MH})(24{,}000 \text{ MHs})$$
 Estimated fixed manufacturing overhead 780,000 Estimated variable manufacturing overhead: $4.00 per MH × 24,000 MHs 96,000 Estimated total manufacturing overhead cost 876,000 The predetermined overhead rate is computed as follows:  Estimated total manufacturing overhead (a) 876,000 Estimated total machine-hours (b) 24,000 MHs Predetermined overhead rate (a) ÷ (b) 36.50 per MH Fabrication Department: Using the equation $$Y = a + bX$$, the estimated total manufacturing overhead cost would be depicted as follows: $$Y = 300{,}000 + (1.00 \text{ per MH})(30{,}000 \text{ MHs})$$  Estimated fixed manufacturing overhead 300,000 Estimated variable manufacturing overhead:$1.00 per MH × 30,000 MHs 30,000 Estimated total manufacturing overhead cost 330,000

The predetermined overhead rate is computed as follows:

 Estimated total manufacturing overhead (a) 330,000 Estimated total direct labor-hours (b) 30,000 MHs Predetermined overhead rate (a) ÷ (b) 11.00 per MH

2. Assume Delph uses departmental predetermined overhead rates based on machine-hours. Compute the total manufacturing cost assigned to Job D-70 and Job C-200. (Round your intermediate calculations to 2 decimal places. Round your final answers to nearest whole dollar amount.)
Total manufacturing cost
Job D-70 1,742,000
Job C-200 1,514,000
วิธีคิด

Total manufacturing costs assigned to Jobs D-70 and C-200:

D-70 C-200
Direct materials 690,000 540,000
Direct labor 380,000 440,000
Molding Department (16,000 MHs × $36.50 per MH; 8,000 MHs ×$36.50 per MH) 584,000 292,000
Fabrication Department (8,000 MH × $11.00 per MH; 22,000 MH ×$11.00 per MH) 88,000 242,000
Total manufacturing cost 1,742,000 1,514,000

3. Assume Delph uses departmental predetermined overhead rates based on machine-hours. If Delph establishes bid prices that are 150% of total manufacturing cost, what bid prices would it have established for Job D-70 and Job C-200? (Round your intermediate calculations to 2 decimal places. Round your final answers to nearest whole dollar amount.)
Bid price
Job D-70 2,613,000
Job C-200 2,271,000
วิธีคิด

Bid prices for Jobs D-70 and C-200:

D-70 C-200
Total manufacturing cost (a) 1,742,000 1,514,000
Markup percentage (b) 150 % 150 %
Bid price (a) × (b) 2,613,000 2,271,000

4. Assume Delph uses departmental predetermined overhead rates based on machine-hours. What is Delph’s cost of goods sold for the year? (Round your intermediate calculations to 2 decimal places. Round your final answer to nearest whole dollar amount.)
Cost of goods sold 3,256,000
วิธีคิด
Because the company has no beginning or ending inventories and only Jobs D-70 and C-200 were started, completed, and sold during the year, the cost of goods sold is equal to the sum of the manufacturing costs assigned to both jobs of $3,256,000 (=$1,742,000 + $1,514,000). Required information [The following information applies to the questions displayed below.] Delph Company uses a job-order costing system and has two manufacturing departments—Molding and Fabrication. The company provided the following estimates at the beginning of the year: Molding Fabrication Total Machine-hours 24,000 30,000 54,000 Fixed manufacturing overhead cost 780,000 300,000 1,080,000 Variable manufacturing overhead cost per machine-hour 4.00 1.00 During the year, the company had no beginning or ending inventories and it started, completed, and sold only two jobs—Job D-70 and Job C-200. It provided the following information related to those two jobs: Job D-70 Molding Fabrication Total Direct materials cost 370,000 320,000 690,000 Direct labor cost 240,000 140,000 380,000 Machine-hours 16,000 8,000 24,000 Job C-200 Molding Fabrication Total Direct materials cost 260,000 280,000 540,000 Direct labor cost 140,000 300,000 440,000 Machine-hours 8,000 22,000 30,000 Delph had no underapplied or overapplied manufacturing overhead during the year. 1. Assume Delph chooses to combine its departmental rates from requirement 1 into a plantwide predetermined overhead rate based on machine-hours. 1. Compute the plantwide predetermined overhead rate. 2. Compute the total manufacturing cost assigned to Job D-70 and Job C-200. 3. If Delph establishes bid prices that are 150% of total manufacturing costs, what bid prices would it have established for Job D-70 and Job C-200? 4. What is Delph’s cost of goods sold for the year? Solution 1. Assume Delph chooses to combine its departmental rates from requirement 1 into a plantwide predetermined overhead rate based on machine-hours. Compute the plantwide predetermined overhead rate. (Round your answer to 2 decimal places.)  Predetermined overhead rates 22.33 per MH วิธีคิด The plantwide overhead rate of$22.33 per machine-hour is calculated by combining the estimated manufacturing overhead costs computed in requirement 1a for Molding and Fabrication ($876,000 +$330,000 = $1,206,000) and then dividing by the estimated total machine-hours (24,000 + 30,000 = 54,000):  Estimated total manufacturing overhead (a) 1,206,000 Estimated total machine-hours (MHs) (b) 54,000 MHs Predetermined overhead rate (a) ÷ (b) 22.33 per MH 2. Assume Delph chooses to combine its departmental rates from requirement 1 into a plantwide predetermined overhead rate based on machine-hours. Compute the total manufacturing cost assigned to Job D-70 and Job C-200. (Round your intermediate calculations to 2 decimal places.) Total manufacturing cost Job D-70 1,605,920 Job C-200 1,650,000 วิธีคิด Total manufacturing cost assigned to Jobs D-70 and C-200: D-70 C-200 Direct materials 690,000 540,000 Direct labor 380,000 440,000 Manufacturing overhead applied ($22.33 per MH × 24,000 MHs; $22.33 per MH × 30,000 MHs) 535,920 669,900 Total manufacturing cost 1,605,920 1,649,900 3. Assume Delph chooses to combine its departmental rates from requirement 1 into a plantwide predetermined overhead rate based on machine-hours. If Delph establishes bid prices that are 150% of total manufacturing costs, what bid prices would it have established for Job D-70 and Job C-200? (Round your intermediate calculations to 2 decimal places.) Bid price Job D-70 2,408,880 Job C-200 2,475,000 วิธีคิด Bid prices for Jobs D-70 and C-200: D-70 C-200 Total manufacturing cost (a) 1,605,920 1,649,900 Markup percentage (b) 150 % 150 % Bid price (a) × (b) 2,408,880 2,474,850 4. Assume Delph chooses to combine its departmental rates from requirement 1 into a plantwide predetermined overhead rate based on machine-hours. What is Delph’s cost of goods sold for the year? (Round your intermediate calculations to 2 decimal places.) Cost of goods sold 3,255,920 วิธีคิด Because the company has no beginning or ending inventories and only Jobs D-70 and C-200 were started, completed, and sold during the year, the cost of goods sold is equal to the sum of the manufacturing costs assigned to both jobs of$3,255,820 (= $1,605,920 +$1,649,900).
Fogerty Company makes two products—Hubs and Sprockets. Data regarding the two products follow:
Direct Labor-Hours per Unit Annual Production
Hubs 0.80 16,000 units
Sprockets 0.40 50,000 units

1. Hubs require $30 in direct materials per unit, and Sprockets require$13.
2. The direct labor wage rate is $12 per hour. 3. Hubs are more complex to manufacture than Sprockets and they require special processing. 4. The company’s activity-based absorption costing system has the following activity cost pools: Activity Cost Pool (and Activity Measure) Estimated Overhead Cost Expected Activity Hubs Sprockets Total Machine setups (number of setups) 18,720 80 64 144 Special processing (machine-hours) 144,000 3,600 0 3,600 General factory (Direct labor-hours) 426,400 12,800 20,000 32,800 Required: 1. Compute the activity rate for each activity cost pool. 2. Compute the unit product cost for Hubs and Sprockets using activity-based absorption costing. Solution 1. Compute the activity rate for each activity cost pool. Activity Cost Pool Activity Rate Machine setups 130 per setup Special processing 40 per MH General factory 13 per DLH วิธีคิด Activity rates are computed as follows: Activity Cost Pool (a) Estimated Overhead Cost (b) Expected Activity (a) ÷ (b) Activity Rate Machine setups 18,720 144 setups 130 per setup Special processing 144,000 3,600 MHs 40 per MH General factory 426,400 32,800 DLHs 13 per DLH 2. Compute the unit product cost for Hubs and Sprockets using activity-based absorption costing. (Do not round intermediate calculations. Round your answers to 2 decimal places.) Hubs Sprockets Direct materials 30.00 13.00 Direct labor 9.60 4.80 Manufacturing overhead 20.05 5.37 Unit product cost 59.65 23.17 วิธีคิด Overhead is assigned to the two products as follows: Hubs: Activity Cost Pool (a) Activity Rate (b) Activity (a) × (b) ABC Cost Machine setups 130 per setup 80 setups 10,400 Special processing 40 per MH 3,600 MHs 144,000 General factory 13 per DLH 12,800 DLHs 166,400 Total 320,800 Sprockets: Activity Cost Pool (a) Activity Rate (b) Activity (a) × (b) ABC Cost Machine setups 130 per setup 64 setups 8,320 Special processing 40 per MH 0 MHs 0 General factory 13 per DLH 20,000 DLHs 260,000 Total 268,320 Each product’s unit product cost is computed as follows: Hubs Sprockets Direct materials 30.00 13.00 Direct labor:$12.00 per DLH × 0.80 DLHs per unit 9.60
$12.00 per DLH × 0.40 DLHs per unit 4.80 Manufacturing overhead:$320,800 ÷ 16,000 units 20.05
$268,320 ÷ 50,000 units 5.37 Unit product cost 59.65 23.17 Harrison Company makes two products and uses a traditional costing system in which a single plantwide predetermined overhead rate is computed based on direct labor-hours. Data for the two products for the upcoming year follow: Rascon Parcel Direct materials cost per unit 14.00 6.00 Direct labor cost per unit 2.70 3.80 Direct labor-hours per unit 0.30 0.35 Number of units produced 18,000 46,000 These products are customized to some degree for specific customers. Required: 1. The company’s manufacturing overhead costs for the year are expected to be$473,000. Using the company’s traditional costing system, compute the unit product costs for the two products.
2. Management is considering an activity-based absorption costing system in which half of the overhead would continue to be allocated based on direct labor-hours and half would be allocated based on engineering design time. This time is expected to be distributed as follows during the upcoming year:
Rascon Parcel Total
Engineering design time (in hours) 4,400 4,400 8,800

Compute the unit product costs for the two products using the proposed activity-based absorption costing system.

Solution

1. The company’s manufacturing overhead costs for the year are expected to be $473,000. Using the company’s traditional costing system, compute the unit product costs for the two products. (Round your intermediate calculations and final answers to 2 decimal places.) Rascon Parcel Unit product cost 23.30 17.50 วิธีคิด The unit product costs under the company’s traditional costing system would be computed as follows: Rascon Parcel Total Number of units produced (a) 18,000 46,000 Direct labor-hours per unit (b) 0.30 0.35 Total direct labor-hours (a) × (b) 5,400 16,100 21,500 Total manufacturing overhead (a) 473,000 Total direct labor-hours (b) 21,500 DLHs Predetermined overhead rate (a) ÷ (b) 22 per DLH Rascon Parcel Direct materials 14.00 6.00 Direct labor 2.70 3.80 Manufacturing overhead: 0.30 DLH per unit ×$22 per DLH 6.60
0.35 DLH per unit × $22 per DLH 7.70 Unit product cost 23.30 17.50 2. Compute the unit product costs for the two products using the proposed activity-based absorption costing system. (Round your intermediate calculations and final answers to 2 decimal places.) Rascon Parcel Unit product cost 26.57 16.22 วิธีคิด The unit product costs using activity-based absorption costing can be computed as follows: Activity Cost Pool (a) Estimated Overhead Cost* (b) Expected Activity (a) ÷ (b) Activity Rate Labor related 236,500 21,500 direct labor-hours 11.00 per direct labor-hour Engineering design 236,500 8,800 engineering-hours 26.88 per engineering-hour 473,000 * The total estimated manufacturing overhead cost of$473,000 is split evenly between the two activity cost pools.

Manufacturing overhead is assigned to the two products as follows:
Rascon:

Activity Cost Pool (a) Activity Rate (b) Activity (a) × (b) ABC Cost
Labor related 11.00 per DLH 5,400 DLHs 59,400
Engineering design 26.88 per engineering-hour 4,400 engineering-hours 118,272
Total 177,672
Parcel:
Activity Cost Pool (a) Activity Rate (b) Activity (a) × (b) ABC Cost
Labor related 11.00 per DLH 16,100 DLHs 177,100
Engineering design 26.88 per engineering-hour 4,400 engineering-hours 118,272
Total 295,372

The unit product costs combine direct materials, direct labor, and overhead costs:

Rascon Parcel
Direct materials 14.00 6.00
Direct labor 2.70 3.80
($177,672 ÷ 18,000 units;$295,372 ÷ 46,000 units)