Question

Billowy Materials Company makes various pillow fill for a wide variety of resellers. Because of the semi-custom nature of Billowly's production, Billowly has traditionally used a job costing system in each of its three manufacturing departments. Manufacturing overhead is currently being applied to jobs on the basis of direct labor costs in the fabrication department, direct labor hours in the preparation department, and machine hours in the finishing department. For the current year, the following estimates had been generated by management based on a recent period's results and expectations for changes in market demand. Manufacturing Overhead Direct labor costs Direct labor hours Machine hours Department Fabrication $840,000 $1,400,000 100,000 400,000 Preparation $1,500,000 $1,250,000 125,000 500,000 Finishing $720,000 $450,000 40,000 120,000 Please refer to the department and job cost records data file for job-specific cost and pricing information (where appropriate), as well as manufacturing overhead incurred in each department, for the current month (found in the “Notes and Dept Information” tab). Note that a blank selling price reflects a job that is still in process or remains in inventory, which will also be denoted in the status field. Using the estimates above and the job cost records data, answer the following: 1) What was the predetermined overhead rate for each department for the year? 2) What were the total manufacturing costs assigned to jobs in each department this month? 3) What was the under- or over-applied overhead for each department at the end of the month? What might this tell you about the full year overhead estimates in each department? 4) What was the total cost of ending work in process inventory & total cost of goods sold? 5) What was the overall gross margin of Billowy for the period?

Answer 1

Answer for 1) Overhead Rate for each department as below:

Fabrication: 2.1

Prepration: 3

Finishing: 6

Answer for 2) Total mfg. cost in each department this month as below

Fabrication: $ 18666.66

Prepration: $ 229166.66

Finishing: $ 97500

Answer 3) Mfg. under or over applied overhead incurred this month as below:

Fabrication: $ 122666

Prepration: $ 105166

Finishing: $45500

Answer for 4) Total cost of ending work in process inventory as below:

Cost of good sold: $ 6160000

Refer to below details for reference:

» Predetermined overhead rate for each department for the year: - Fabrication Preparation Finishing $ 840,000 /400000 1500,000/50000 720,000/120000 6 11 12 2) 2 + 450 000 + 14 00000 Duer head rate estimated Manufacturingoverheadost Estimated Total Base Unit Total manufacturing cost in each department this month Fabrication Preparation Finishing 8,40000 1500,000 720,000 + 1250,000 Answers 22 40,000/12 18,6666.66 97500 37 Manufacturing overhead Inccand this month Fabrication 64000 12 4,000 52000 "Underapplied Under applied Under applied 229 166-124000 by = 122666 9750-5200 - 105166 45 500 2750000/12 1170,000/12 229166.66 5 peparation finishing by 186666-64000

(4) Total cost af ending. work in process inventory & to 8,40,000 + 1 500,000 + 720,000 -$30 60,000 cost of goods Sold Total cost of ending works 3060000 + 3100,000 - $6160,000