Question

fun toys use a job-costing system

II. Calculation and Analysis (42 points in total) 41. Fun Toys uses a job-costing system under which materials and labors used in the manufacturing process are directly allocated to different jobs. Whereas costs incurred in the manufacturing support department are indirect in nature and allocated to different jobs on the basis of direct labor-hours. Fun budgets 2018 manufacturing-support costs to be $5,100,000 and 2018 direct labor-hours to be 150.000. At the end of 2018, Fun collects the cost-related data of different jobs that were started and completed in 2018 for comparison. They are as follows: Production period Direct material costs Direct labor costs Direct labor-hours Steel Wheels Magic Wheels Jan-May 2018 May-Sept 2018 $78,290 $94,650 $25,445 $32,752 840 960 Direct materials and direct labor are paid for on a contractual basis. The costs of each are known when direct materials are used or when direct labor-hours are worked. The 2018 actual manufacturing-support costs were $5,355,000 and the actual direct labor-hours were 153,000.

Answer 1

Solution:

Budgeted indirect cost rate: [Budgeted indirect costs (assembly support) / Budgeted direct labor hours] = [5,100,000 / 150,000 hours] = $34 per direct labor hour

Actual indirect cost rate: [Actual indirect costs (assembly support) / Actual direct labor hours] = [5,355,000 / 153,000 hours] = $35 per direct labor hour

Normal costing	Steel Wheels	Magic Wheels
Direct costs
Direct materials	78,290	94,650
Direct labor	25,445	32,752
	103,735	127,402
Indirect costs
Manufacturing support ($34*840; $34*960)	28,560	32,640
Total costs	132,295	160,242
Actual costing	Steel Wheels	Magic Wheels
Direct costs
Direct materials	78,290	94,650
Direct labor	25,445	32,752
	103,735	127,402
Indirect costs
Manufacturing support ($35*840; $35*960)	29,400	33,600
Total costs	133,135	161,002

　

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