Question

The Gilster Company, a machine tooling firm, has several plants. One plant, located in St. Falls, Minnesota, uses a job order costing system for its batch production processes. The St. Falls plant has two departments through which most jobs pass. Plantwide overhead, which includes the plant manager’s salary, accounting personnel, cafeteria, and human resources, is budgeted at $250,000. During the past year, actual plantwide overhead was $240,000. Each department’s overhead consists primarily of depreciation and other machine-related expenses. Selected budgeted and actual data from the St. Falls plant for the past year are as follows.

	Department A				Department B
Budgeted department overhead
(excludes plantwide overhead)	$	150,000			$	600,000
Actual department overhead		160,000				620,000
Expected total activity:
Direct labor hours		35,000				15,000
Machine-hours		10,000				40,000
Actual activity:
Direct labor hours		51,000				9,000
Machine-hours		10,500				42,000
For the coming year, the accountants at St. Falls are in the process of helping the sales force create bids for several jobs. Projected data pertaining only to job no. 110 are as follows. Direct materials $ 25,000 Direct labor cost: Department A (2,200 hr) 45,000 Department B (800 hr) 10,000 Machine-hours projected: Department A 200 Department B 1,200 Units produced 10,000

Required:

a-1. Assume the St. Falls plant uses a single plantwide overhead rate to assign all overhead (plantwide and department) costs to jobs. Find the overhead rate by using expected direct labor hours.

a-2. Determine the projected amount of total manufacturing costs per unit for the units in job no. 110.

Answer 1

a-1) Overhead rate hour = total budgeted overhead/budgeted labor hours
total budgeted overhead (250000+150000+600000) = 1000000
budgeted labor hour (35000+15000) = 50000
Overhead rate hour = 1000000/50000 =20 per direct labor hour
a-2) total manufacturing cost per unit job 110
Direct material				25000
direct labor
Department A				45000
Department B				10000
overhead (2200+800)*20				60000
total cost				140000
unit produced				10000
manufacturing cost per unit				14

Please give a thumbs up if it is helpful & let me know if any doubt