Chapter 2: Job-Order Costing
Est. machine hrs 205,000 hours Fixed MO cost $3,075,000 Variable MO cost $2 job: DM cost $1,518 DL cost $1,089 Machine hrs used 80 hours compute the overhead applied to the job
$1,360 $17 POHR x 80 MH = $1,360
What is the total manufacturing cost assigned to the job (Molding and Firing)
$1,663 All DM + All DL + All MO
Weaver Company's plantwide predetermined overhead rate is $21.00 per direct labor-hour and its direct labor wage rate is $14.00 per hour. The following information pertains to Job A200: Direct Materials $290 Direct labor $210 If Job A-200 consists of 50 units, what is the average cost assigned to each unit in the job?
$16.30 $815 TMC / 50 units = $16.30
Est. machine hrs 205,000 hours Fixed MO cost $3,075,000 Variable MO cost $2 Compute the plantwide predetermined overhead rate.
$17/MH [ $3,075,000 + $2(205,000 hours) ] / 205,000 hours = $17/MH
The predetermined departmental overhead rates in Molding is $23.00 per direct labor hour. The company's direct labor wage rate is $18.00 per hour Direct materials $290 Direct labor $198 find the manufacturing overhead applied
$253 $198 / ($18/DLH) = 11 DLHs $23 POHR x 11 DLH = $253
Sigma Corporation applies overhead cost to jobs on the basis of direct labor cost. Job V, which was started and completed during the current period, shows charges of $6,100 for direct materials, $8,000 for direct labor, and $5,920 for overhead on its job cost sheet. Job W, which is still in process at year-end, shows charges of $3,900 for direct materials and $4,400 for direct labor. How much overhead cost should be applied to Job W?
$3,256 $5,920 / $8,000 = .74 POHR $0.74 POHR x $4,400 DL = $3,256
Est. direct labor-hours 97,500 DLH Est. fixed overhead cost $1,316,250 Est. variable overhead cost $0.50/DLH Actual overhead cost $1,337,350 Actual total direct labor 101,100 hours Direct labor hours worked on the job 390 hours what is the overhead applied to the job's cost?
$5,460 [ $1,316,250 + ($0.50)97,500 ] / 97,500 = $14/DLH 390 DLH x $14 POHR
The predetermined departmental overhead rates in Firing is 150% of direct materials cost. The company's direct labor wage rate is $18.00 per hour Direct materials $340 Direct labor $72 find the manufacturing overhead applied
$510 $340 DM x 150% = $510
Garret Corporation uses a predetermined overhead rate that was based on a cost formula that estimated $7,216,500 of total manufacturing overhead for an estimated activity level of 170,000 direct labor-hours. The company incurred actual total manufacturing overhead costs of $7,110,375 and 165,000 total direct labor-hours during the period. Determine the amount of manufacturing overhead that would have been applied to all jobs during the period.
$7,004,250 $7,216,500 / 170000 direct labor-hours = $42.45 ($42.45) x (165000 units) = $7,004,250
Weaver Company's plantwide predetermined overhead rate is $21.00 per direct labor-hour and its direct labor wage rate is $14.00 per hour. The following information pertains to Job A200: Direct materials $290 Direct labor $210 What is the total manufacturing cost assigned to Job A-200?
$815 $210 / ($14/DLH) = 15 DLHs 15 DLH x $21 POHR = $315 MO applied DM + DL + MO applied = $815
dept. approach to multiple POHR
1. calculate the predetermined overhead cost for each dept. 2. calculate the POHR for each dept. 3. calculate the amount of overhead applied from both depts. to a job 4. calculate the total job cost 5. calculate the selling price for the job
4. total job cost =
DL + DM + MO
predetermined overhead rate =
Estimated Total MO / Estimated Total Amount of Allocation Base
2. POHR =
Overhead Cost / Est. Amount of Allocation Base
overhead applied to a particular job =
POHR x Actual Amount of the Allocation Base
3. overhead applied =
POHR x Amount of AB used in Job
1. overhead cost for each dept. =
Total Fixed MO + (Variable MO per AB x Amount of Allocation Base)
job-order costing
a cost system that assigns costs to specific production batches or jobs
bill of materials
a document that lists the quantity of each type of direct material needed to complete a standard unit of product
materials requisition form
a document that specifies the type and quantity of materials to be drawn from the storeroom and that identifies the job that will be charged for the cost of those materials
job cost sheet
a form that records the materials, labor, and manufacturing overhead costs charged to that job
allocation base
a measure such as direct labor hours or machine hours that is used to assign overhead costs to products and services
plant wide overhead rate
a single predetermined overhead rate that is used throughout a plant
absorption costing
all manufacturing costs are assigned to units of product
normal cost system
applies overhead to jobs by multiplying a predetermined overhead rate by the actual amount of the allocation base incurred by the jobs
when is the POHR determined?
before the period begins
unit product cost in a job-order costing system
costs are traced and allocated to jobs and then the costs of the job are divided by the number of units in the job to = an average cost per unit
activity-based costing
creates overhead rates based on the activities performed w/in depts.
to improve job cost accuracy, the allocation base in the POHR should __________ the overhead cost
drive (cost driver) companies should also use multiple POHR
how do companies assign overhead costs to products?
find an accurate predetermined overhead rate
adjustment for underapplied (overapplied) overhead
increases (decreases) CGS and decreases (increases) net income
activity-based costing more accurately measures:
the demands that jobs, products, customers, and other cost objects make on overhead resources
why are multiple POHR more accurate?
they reflect differences across depts. in terms of how jobs consume overhead costs
multiple predetermined overhead rates
uses more than one overhead rate to apply overhead costs to jobs
underapplied overhead
when a company applies less overhead to production than it actually incurs
overapplied overhead
when a company applies more overhead to production than it actually incurs