Question

Managerial Project (Job Costing) Innes Beach Manufacturing Company (Part 1) The Innes Beach Manufacturing Company produces a basic product that is modified to the needs of each customer. The modified product can have big cost differences. Each order is considered a job that could include several thousand units of the product. The Company uses a Job Costing System with only one cost pool for Manufacturing Overhead which is allocated based on direct labor hours. The overhead rate is predetermined (Normal Costing) at the beginning of the year. In order to speed up Innes Beach part 2, the overhead items were classified in activities rather than the traditional approach of utilities, depreciation, rent, etc. The following manufacturing data was used to determine the overhead rate for the current year: Total Activity Estimated Costs Design $370,000 Engineering 212,000 Purchasing 24,000 Material Handling 76,000 Machine Set-up 102,000 Machining Activities 980,000 Assembly 125,000 Inspection 340,000 Power Usage(Machines) 300,000 Facilities &Management 1,500,000 Robotics 2,971,000 Total Est. Overhead $7,000,000 Cost Driver Estimated Use of Driver 125,000 hrs. Direct Labor hours The following data is available for the third quarter of the current year: Job 12 Job 13 Job 14 Job 15 Job 16 Beg. Work in Prog. $169,000 0 0 0 0 Direct Material Cost $312,000 $1,000,000 $890,000 $484,000 $458,000 Direct Labor Cost $165,000 $298,000 $190,000 $144,000 $165,000 Direct Labor Hours 2,000 11,000 10,000 5,000 6,000 Units Produced 3,000 2,000 4,000 1,000 5,000

Additional Information:

1. Jobs 12 – 15 were completed this quarter. Job 16 was started but not completed this quarter. Jobs 12 – 14 have been delivered to the customers. Job 12 was in process at the beginning of the quarter and was included in last year’s inventory at a cost of $169,000 as shown above.
2. Round to the nearest dollar on Financial Statements and to the nearest cent on per unit calculations

Complete a Cost of Goods Manufactured Statement for the period.

Answer 1

Overhead rate = $7000000 / 125000 = $56 per DLH

	Job 12	Job 13	Job 14	Job 15	Job 16	Total
Beg Work in Process	$      169,000					$         169,000
Direct Material	$      312,000	$ 1,000,000	$      890,000	$         484,000	$         458,000	$      3,144,000
Direct Labor	$      165,000	$      298,000	$      190,000	$         144,000	$         165,000	$         962,000
Overhead Applied	$      112,000	$      616,000	$      560,000	$         280,000	$         336,000	$      1,904,000
Total	$     758,000	$ 1,914,000	$ 1,640,000	$         908,000	$         959,000	$     6,179,000

Schedule of Cost of Goods manufactured
Direct Material used in production	$ 3,144,000
Direct Labor	$      962,000
Manufacturing Overhead Applied	$ 1,904,000
Total Manufacturing Costs	$ 6,010,000
Add: Beginning Work in Process Inventory	$      169,000
Total Manufacturing Costs to account for	$ 6,179,000
Deduct: Ending Work in Process Inventory	$      959,000
Cost of Goods Manufactured	$ 5,220,000

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