Question

Question 7 Time: 10 minutes Total: 6 marks Bob's Electronics Inc. manufactures high-tech screens for computers. In June, the two production departments had budgeted allocation bases of 8,400 machine hours in Department 1 and 5,860 direct manufacturing labour hours in Department 2. The budgeted manufacturing overheads for the month were $32,000 and $27,500, respectively. For Job 101, the actual costs incurred in the two departments were as follows: Department 2 S106,500 9,100 32.200 Department 1 Direct materials purchased on account S66,000 Direct materials used 12.500 Direct manufacturing labour 32.500 Indirect manufacturing labour 6,600 Indirect materials used 4,500 Lease on equipment 9,750 Utilities 600 5,400 2.850 2.250 750 Job 101 incurred 1,100 machine hours in Department 1 and 400 manufacturing labour hours in Department 2. The company uses a budgeted departmental overhead rate for applying overhead to production. What is the budgeted indirect cost allocation rate for Department 1? (2 marks) 1. 2. What is the budgeted indirect cost allocation rate for Department 2? (2 marks) 3. What is the total cost assigned to Job 101 based on normal costing? (2 marks)

Answer 1

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Bob’s Electronics Inc.
Answer 1	Dept. 1	Note
Budgeted Machine Hours	8,400.00	A
Manufacturing overhead	32,000.00	B
Indirect cost allocation rate	3.81	C=B/A
Answer 2	Dept. 2
Budgeted Labor Hours	5,860.00	D
Manufacturing overhead	27,500.00	E
Indirect cost allocation rate	4.69	F=E/D
Workings for Answer 3	Dept. 1	Dept. 2	Note
Actual Machine/ Labor Hours	1,100.00	400.00	G
Indirect cost allocation rate	3.81	4.69	H= See C,F
Overhead applied to Job 101	4,190.48	1,877.13	I=G*H
Answer 3	Dept. 1	Dept. 2	Total
Direct Materials	66,000.00	106,500.00	172,500.00
Direct Labor	12,500.00	9,100.00	21,600.00
Overhead applied	4,190.48	1,877.13	6,067.61
Total cost assigned to Job 101	82,690.48	117,477.13	200,167.61