Question

4-31 Job costing, accounting for manufacturing overhead, budgeted rates. The Fasano Company uses a job-costing system at its Dover, Delaware, plant. The plant has a machining department and a finishing department. Fasano uses normal costing with two direct-cost categories (direct materials and direct manu- facturing labor) and two manufacturing overhead cost pools (the machining department with machine- hours as the allocation base, and the finishing department with direct manufacturing labor costs as the allocation base). The 2011 budget for the plant is as follows: Manufacturing overhead costs Direct manufacturing labor costs Direct manufacturing labor-hours Machine-hours Machining Department $10,660,000 S 940,000 36,000 205,000 Finishing Department $7,372,000 $3,800,000 145,000 32,000 ASSIGNMENT MATERAL Required 1. Prepare an overview diagram of Fasano's job-costing system. 2. What is the budgeted manufacturing overhead rate in the machining department? In the finishing department? 3. During the month of January, the job-cost record for Job 431 shows the following: Machining Department $15,500 $ 400 Finishing Department $5,000 $1,1,00 Direct materials used Direct manufacturing labor costs Direct manufacturing labor-hours Machine-hours 8& 130 Compute the total manufacturing overhead cost allocated to Job 431. 4. Assuming that Job 431 consisted of 400 units of product, what is the cost per unit? 5. Amounts at the end of 2011 are as follows: Manufacturing overhead incurred Direct manufacturing labor costs Machine-hours Machining Department $11,070,000 $ 1,000,000 210,000 Finishing Department $8,236,000 $4,400,000 31,000 Compute the under-or overallocated manufacturing overhead for each department and for the Dover plant as a whole. 6. Why might Fasano use two different manufacturing overhead cost pools in its job-costing system?

answers to questions 1-6

Answer 1

Answer The fasano company we a job.casting system at its Dover, Delain plant ① An Overview diagram of fansand's job casting Machining depralimt Finishing departme Maneefaturing oveshe Manefackuni oueshes Indired cost pool Bal Cast Indirect cost-allocation Machine hours in fired manufacking 1. Labor se Machining departman Cost in finishing department object produl Indured - costs .. Direct cost Direct costs Bised material Dived manufacturing labor

② The budgeted manufacturing overhead rcate in the maching department o Manufacturing overhead : 10,660,000 Machine hours : 205.000 Manufacturing departments - 10660000 205 000 ① A per machine hour $52 Finishig department Manu facturing overhead = 7372 000 Direct manufactessing labor col. = 3800 000 104' Disreck maneefacteering labas = 1945 the mont of Jan. job-cast record Joh 431 Manching departmen overhead

③ Machine hour = 130 per machine hour : 52 2528 130 hous 1. = 6760 deprestment overhead : 194 . :14 Finished Discect manufacturing labescos = 1100: 19uXlloo . 2134 overhead allocated Total manufacturing 6760+ 2134 : :.8894 The Job usi consisted of woo units of product Disrect costs - $ 15 500 Direct manufacturing departmeb 3.6 500 Finishing department 2400

Direed manufacturing labo = 11000® Finishing depeatment = 22000 Indirect costs = 6760 Marchinning department overhead =528130 - 2134 Finishing deparment overhead = 1948 1100 75 6760 t 2134 = 8894 Finishing deparwat = 22.000 overhead 8894 522.000 € 8894 Total cost 2.30 gale . po unich produl last = 400 . = 30894 400 unit per unit produced cost = 77.235

② Manufaturing overhead for each department. O Manufacturing overhead (actered) Overhead allocated - 2100008 52 Finshing .. 8,236,000 - 194% of 4400,00 incomed Machining = 11,070000 incurred Frnishing -8536.000 under allocated manufacturing overhead = 12 Maching = 10920000 Finishing = 300,000 Overhead allocated manufacturing overhead Machining = 150 000 Finishing = 150000 Total over allocated overhe 150000

© The two different manuffacturing overhead lot d homogeneous cost pool ts one where all costo have the time and a simillar Cause and effect or benefits recience relationship with where those in the finishing department have a cause and effect relations with direct manufacturing labor ca . Honda motors believe that the benefule of Lasing two cost pools the cost of implementing a more complex system