Question

Valley Corporation uses a job cost system and has two production departments, A and B. Budgeted manufacturing costs for the year are: Department A Department B Direct materials $600,000 $100,000 Direct manufacturing labor $100,000 $600,000 Manufacturing overhead $400,000 $300,000 The actual material and labor costs charged to Job #432 were as follows: Total Direct materials: $28,000 Direct labor: Department A $18,000 Department B $12,000 $30,000 Apple Valley applies manufacturing overhead costs to jobs on the basis of direct manufacturing labor cost using departmental rates determined at the beginning of the year. Determine the total cost for Job #432:

Valley Corporation uses a job cost system and has two production departments, A and B. Budgeted manufacturing costs for the year are: Department A Department B Direct materials $600,000 $100,000 Direct manufacturing labor $100,000 $600,000 Manufacturing overhead $400,000 $300,000 The actual material and labor costs charged to Job #432 were as follows: Total $28,000 Direct materials: Direct labor: Department A Department B $18,000 $12,000 $30,000 Apple Valley applies manufacturing overhead costs to jobs on the basis of direct manufacturing labor cost using departmental rates determined at the beginning of the year. Determine the total cost for Job #432:

Answer 1

For department A

Direct manufacturing labor cost = $100,000

Manufacturing overhead = $400,000

Predetermined overhead rate = Manufacturing overhead/ Direct manufacturing labor cost

= 400,000/100,000

= 400% of direct labor cost

For department B

Direct manufacturing labor cost = $600,000

Manufacturing overhead = $300,000

Predetermined overhead rate = Manufacturing overhead/ Direct manufacturing labor cost

= 300,000/600,000

= 50% of direct labor cost

Department A overhead cost applied to Job 432 = Direct labor cost of department A x Predetermined overhead rate of Department A

= 18,000 x 400%

= $72,000

Department B overhead cost applied to job 432 = Direct labor cost of department B x Predetermined overhead rate of Department B

= 12,000 x 50%

= $6,000

Job Cost Sheet ( Job 432)
Direct materials	28,000
Direct labor:
Department A	18,000
Department B	12,000
Overhead applied:
Department A	72,000
Department B	6,000
Total cost	$136,000

the total cost for Job #432:$136,000

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