The Solomon Company uses a job costing system at its Dover, Delaware plant. The plant has a machining department. Its job costing system has two direct cost categories (direct materials and direct manufacturing labour) and two manufacturing overhead cost pools (the machining department, allocated using machine hours and the finishing department, allocated using manufacturing labour costs). The 2002 budget for the plant is: Machining Dept. Finishing Dept. Manufacturing Overhead 10,000,000 8,000,000 Direct manufacturing labour cost 900,000 4,000,000 Direct manufacturing labour hours 30,000 160,000 Machine hours 200,000 33,000 (a) What is the budgeted overhead rate that should be used in the machining department? In the finishing department? (b) During the month of January, the cost record for job 431 shows the following: Machining Dept. Finishing Dept. Direct material used 14,000 3,000 Direct manufacturing labour costs 600 1,250 Direct manufacturing labour hours 30 50 Machine hours 130 10 What is the total manufacturing overhead allocated to job 431? (c) Assuming that job 431 consisted of 20 units of product, what is the unit product cost?
Process Costing
Process costing is a sort of operation costing which is employed to determine the value of a product at each process or stage of producing process, applicable where goods produced from a series of continuous operations or procedure.
Job Costing
Job costing is adhesive costs of each and every job involved in the production processes. It is an accounting measure. It is a method which determines the cost of specific jobs, which are performed according to the consumer’s specifications. Job costing is possible only in businesses where the production is done as per the customer’s requirement. For example, some customers order to manufacture furniture as per their needs.
ABC Costing
Cost Accounting is a form of managerial accounting that helps the company in assessing the total variable cost so as to compute the cost of production. Cost accounting is generally used by the management so as to ensure better decision-making. In comparison to financial accounting, cost accounting has to follow a set standard ad can be used flexibly by the management as per their needs. The types of Cost Accounting include – Lean Accounting, Standard Costing, Marginal Costing and Activity Based Costing.
The Solomon Company uses a
Machining Dept. Finishing Dept.
Manufacturing Overhead 10,000,000 8,000,000
Direct
Direct manufacturing labour hours 30,000 160,000
Machine hours 200,000 33,000
(a) What is the budgeted overhead rate that should be used in the machining department? In
the finishing department?
(b) During the month of January, the cost record for job 431 shows the following:
Machining Dept. Finishing Dept.
Direct material used 14,000 3,000
Direct manufacturing labour costs 600 1,250
Direct manufacturing labour hours 30 50
Machine hours 130 10
What is the total manufacturing overhead allocated to job 431?
(c) Assuming that job 431 consisted of 20 units of product, what is the unit product cost?
(d) Balances at the end of 2002 are as follows:
Machining Dept. FinishingDept.
Manufacturing overhead incurred 11,200,000 7,900,000
Direct manufacturing labour costs 950,000 4,100,000
Machine Hours 220,000 32,000
Compute the manufacturing overhead variance for each department and for the Dover
plant as a whole.
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