Question

Brighton Services repairs locomotive engines. It employs 100 full-time workers at $16 per hour. Despite operating at capacity, last year's performance was a great disappointment to the managers. In total, 10 jobs were accepted and completed, incurring the following total costs Direct materials Direct labor Manufacturing overhead $1,042,400 4,320,000 1,880,000 Of the $1,080,000 manufacturing overhead, 35 percent was variable overhead and 65 percent was fixed. This year, Brighton Services expects to operate at the same activity level as last year, and overhead costs and the wage rate are not expected to change. For the first quarter of this year, Brighton Services completed two jobs and was beginning the third (Job 103). The costs incurred follow 30b 101 102 103 Total manufacturing overhead Total marketing and sinistrative costs Direct Materials $137.900 100,000 94.700 Direct Labor $497,000 313,000 198,400 271.900 117,000 You are a consultant associated with

Answer 1

Last Year Profit & Loss
	Debit		Credit
	(Amount in $)		(Amount in $)
To Direct overhead cost	10,42,400
Direct Labour cost	43,20,000
To Mfg. Overgeads	10,80,000
This Year Profit & Loss
	Debit		Credit
	(Amount in $)		(Amount in $)
To Direct material		By Sales
Job No. 101	1,37,900	Job No. 101	8,60,000
Job No. 102	1,00,000	Job No. 102	5,64,000
Job No. 103	94,700
Sum of all 3 Jobs=	3,32,600
To Direct Labour
Job No. 101	4,97,000
Job No. 102	3,13,000
Job No. 103	1,98,400
Sum of all 3 Jobs=	10,08,400
Total Mfg. overheads	2,71,900
Total Marketing & Administrative Cost	1,17,000
Answer No. a)
This Year mfg. cost = Direct Material + Direct Labour +Mfg. Overhead+ Fixed Marketing & Administrative Overheads
Amount = 3,32,600 + 10,08,400 + 2,71,900 + (70% of 1,17,000) =	$ 1694800
Answer No. b)
i) Overhead Rate per Direct Labour Hour for Variable = (35% of 10,08,400) / 1600	220.59
ii) Overhead Rate Per Direct Labour Hour for Fixed = (65% of 10,08,400) / 1600	409.66
Answer No. c)
Total Mfg. cost this Year
	Debit		Credit
	(Amount in $)		(Amount in $)
To Direct material		By Sales
Job No. 101	1,37,900	Job No. 101	8,60,000
Job No. 102	1,00,000	Job No. 102	5,64,000
Job No. 103	94,700
Sum of all 3 Jobs=	3,32,600
To Direct Labour
Job No. 101	4,97,000
Job No. 102	3,13,000
Job No. 103	1,98,400
Sum of all 3 Jobs=	10,08,400
Total Mfg. overheads	2,71,900
Total Marketing & Administrative Cost	1,17,000
	17,29,900
Answer No. d)
Profit or Loss This Year under Actual and Normal System	Amount In $
Cost of Job No. 101
Cost of Job No. 102
	Direct Material	2,37,900
	Direct Labour	8,10,000
	Mfg. Overheads	2,71,900
	Marketing & Administrative Exp. (65% of 1,17,000)	76,050
	Total	13,95,850
Selling Price
Job No. 101		8,60,000
Job No. 102		5,64,000
	Total	14,24,000
Profit = Selling Price - Cost Price	14,24,000 - 13,95,850	28,150