Answered: Products uses a job-costing system…

College Accounting, Chapters 1-27

23rd Edition

ISBN:9781337794756

Author:HEINTZ, James A.

Publisher:HEINTZ, James A.

Chapter26: Manufacturing Accounting: The Job Order Cost System

Section: Chapter Questions

Problem 5SEB: PREDETERMINED FACTORY OVERHEAD RATE Marston Enterprises calculates a predetermined factory overhead...

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Question

Products uses a job-costing system with two direct-cost categories (direct materials and direct manufacturing labor) and one manufacturing overhead cost pool.

Davey allocates manufacturing overhead costs using direct manufacturing labor costs.Davey provides the following information:

	Budget for 2017	Actual Results for 2017
Direct material costs	2,050,000	1,975,000

Direct manufacturing labor costs	1,600,000	1,550,000
Manufacturing overhead costs	2,880,000	2,945,000

Compute the actual and budgeted manufacturing overhead rates for

2017.

During March, the job-cost record for Job 626 contained the following information:

	Direct materials used	$50,000
	Direct manufacturing labor costs	$40,000

Compute the cost of Job 626 using (a) actual costing and (b) normal costing.

At the end of

2017,

compute the under- or overallocated manufacturing overhead under normal costing. Why is there no under- or overallocated overhead under actual costing?

Why might managers at

Davey

Products prefer to use normal costing?

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