Question

Job Costs Using Activity-Based Costing

Heitger Company is a job-order costing firm that uses activity-based costing to apply overhead to jobs. Heitger identified three overhead activities and related drivers. Budgeted information for the year is as follows:

Activity	Cost		Driver	Amount of Driver
Materials handling	$71,100		Number of moves	3,000
Engineering	105,300		Number of change orders	6,500
Other overhead	238,500		Direct labor hours	45,000

Heitger worked on four jobs in July. Data are as follows:

	Job 13-43		Job 13-44		Job 13-45		Job 13-46
Beginning balance	$20,800		$17,200		$3,000		$0
Direct materials	$6,900		$8,600		$11,400		$9,800
Direct labor cost	$850		$1,000		$1,640		$110

	Job 13-43		Job 13-44		Job 13-45		Job 13-46
Number of moves	40		46		28		8
Number of change orders	31		44		18		18
Direct labor hours	850		1,000		1,640		110

By July 31, Jobs 13-43 and 13-44 were completed and sold. Jobs 13-45 and 13-46 were still in process.

Required:

1. Calculate the activity rates for each of the three overhead activities. Round all activity rates to the nearest cent.

Materials handling rate	$ per move
Engineering rate	$ per change order
Other overhead rate	$ per direct labor hour

2. Prepare job-order cost sheets for each job showing all costs through July 31.

When required, round your answers to the nearest dollar. If an amount is zero, enter "0".

Heitger Company
Job-Order Cost Sheets
	Job 13-43	Job 13-44	Job 13-45	Job 13-46
Balance, July 1	$	$	$	$
Direct materials
Direct labor cost
Materials handling
Engineering
Other overhead
Total	$	$	$	$

3. Calculate the balance in Work in Process on July 31.
$

4. Calculate the cost of goods sold for July.
$

5. What if Job 13-46 required no engineering change orders? What is the difference in the new cost of Job 13-46?

$    

How would the cost of the other jobs be affected?

Answer 1

1	Activity rate=Cost of activity/Amount of driver
	Activity		Cost	Driver			Amount of driver	Activity rate
			a				b	a/b
	Materials handling		71100	Number of moves			3000	23.7	Per move
	Engineering		105300	Number of change orders			6500	16.2	Per change order
	Other overhead		238500	Direct labor hours			45000	5.3	Per direct labor hour
2	Job-Order cost sheets
					Job 13-43	Job 13-44	Job 13-45	Job 13-46
	Balance, July 1				20800	17200	3000	0
	Direct materials				6900	8600	11400	9800
	Direct labor cost				850	1000	1640	110
	Materials handling				948	1090	664	190
	(Number of moves*Activity rate)				(40*23.7)	(46*23.7)	(28*23.7)	(8*23.7)
	Engineering				502	713	292	292
	(Number of change orders*Activity rate)				(31*16.2)	(44*16.2)	(18*16.2)	(18*16.2)
	Other overhead				4505	5300	8692	583
	(Direct labor hours*Activity rate)				(850*5.3)	(1000*5.3)	(1640*5.3)	(110*5.3)
	Total				34505	33903	25687	10974
3	Balance in work in process on July 31=Cost of jobs still in process=Cost of Job 13-45 and 13-46=25687+10974=$ 36661
4	Cost of goods sold=Cost of jobs sold=Cost of job 13-43 and 13-44=34505+33903=$ 68408
5	New cost:
					Job 13-46
	Balance, July 1				0
	Direct materials				9800
	Direct labor cost				110
	Materials handling				190
	(Number of moves*Activity rate)				(8*23.7)
	Engineering				0
	(Number of change orders*Activity rate)				(0*16.2)
	Other overhead				583
	(Direct labor hours*Activity rate)				(110*5.3)
	Total				10683
	Cost of other jobs will not be affected by this