Question

Garcia, Inc. uses a job-order costing system for its products, which pass from the Machining Department, to the Assembly Department, to finished-goods inventory. The Machining Department is heavily automated; in contrast, the Assembly Department performs a number of manual-assembly activities. The company applies manufacturing overhead using machine hours in the Machining Department and direct-labor cost in the Assembly Department. The following information relates to the year just ended: Machining Assembly Department Department Budgeted manufacturing $4,000,000 $3,080,000 overhead Actual manufacturing overhead 4,270,000 3,030,000 Budgeted direct-labor cost (based on practical capacity) 1,500,000 5,600,000 Actual direct-labor cost 1,450,000 5,780,000 Budgeted machine hours (based on practical capacity) 400,000 100,000 Actual machine hours 425,000 110,000 The data that follow pertain to job no. 775, the only job in production at year-end. Direct material Direct labor Machine hours Machining Assembly Department Department $23,500 $ 6,800 $ 27,800 $58,600 370 150 Selling and administrative expense amounted to $2,500,000. 2. Compute the cost of the company's year-end work-in-process inventory. Total cost

Answer 1

2
		Machining	Assembly
a	Budgeted Manufacturing Overhead	4,000,000	3,080,000
b	Budgeted Machine Hours	400,000
c	Budgeted Direct labor cost		5,600,000
d	Overhead Rate of Machining =(a/b) Assembly= (a/c)	10	0.55
		Machining	Assembly	Total
a	Direct Material	23,500	6,800	30,300
b	Direct Labor	27,800	58600	86,400
c	Overhead cost for Machining	3700		3,700
d	Overhead cost for Assembly		32,230.00	32,230
e	Total cost of work in Process	55,000	97,630.00	152,630
	Total cost of work in Process			152,630
	Calculation of Overhead cost
	overhead cost of Machining = Machine hour * Overhead rate
	Machining= 370*10= 3700
	Overhead cost of Assembly = direct labor cost * overhead rate
	Overhead cost of Assembly = 58600*0.55=32230
4
		Machining	Assembly
a	applied overhead cost Machining = Overhead rate * actual Machine hours = 10*425,000 Assembly = overhead rate * actual direct labor cost = 0.55*5780000	4,250,000.00	3,179,000.00
b	actual overhead cost	4,270,000.00	3,030,000.00
c	Over or under applied overhead (a-b)	(20,000.00)	149,000.00
	Matching department under - here applied because applied Manufacturing overhead cost is lower than actual overhead cost
	Assembly Department over- here applied, applied Manufacturing overhead cost is higher than actual over head cost
6	Overhead Charged to Work in process during the year
		Machining	Assembly	Total
	applied Manufacturing Overhead	4,250,000.00	3,179,000.00	7,429,000.00
	Overhead Charged to Work in process during the year =7,429,000 (sum of Both department)