Concept explainers
Job costing, normal and actual costing. Atkinson Construction assembles residential houses. It uses a job-costing system with two direct-cost categories (direct materials and direct labor) and one indirect-cost pool (assembly support). Direct labor-hours is the allocation base for assembly support costs. In December 2016, Atkinson budgets 2017 assembly-support costs to be $8,800,000 and 2017 direct labor-hours to be 220,000.
At the end of 2017, Atkinson is comparing the costs of several jobs that were started and completed in 2017.
Laguna Model | Mission Model | |
Construction period | Feb–June 2017 | May–Oct 2017 |
Direct material costs | $106,550 | $127,450 |
Direct labor costs | $36,250 | $41,130 |
Direct labor-hours | 970 | 1,000 |
Direct materials and direct labor are paid for on a contract basis. The costs of each are known when direct materials are used or when direct labor-hours are worked. The 2017 actual assembly-support costs were $8,400,000, and the actual direct labor-hours were 200,000.
- 1. Compute the (a) budgeted indirect-cost rate and (b) actual indirect-cost rate. Why do they differ?
Required
- 2. What are the
job costs of the Laguna Model and the Mission Model using (a) normal costing and (b) actual costing? - 3. Why might Atkinson Construction prefer normal costing over actual costing?
Learn your wayIncludes step-by-step video
Chapter 4 Solutions
COST ACCOUNTING
Additional Business Textbook Solutions
Financial Accounting
Cost Accounting (15th Edition)
Intermediate Accounting
Financial Accounting (12th Edition) (What's New in Accounting)
Horngren's Financial & Managerial Accounting, The Financial Chapters (Book & Access Card)
Principles of Accounting Volume 1
- Compute the total job cost for each of the following scenarios: a. If the direct labor cost method is used in applying factory overhead and the predetermined rate is 100%, what amount should be charged to Job 2010 for factory overhead? Assume that direct materials used totaled 5,000 and that the direct labor cost totaled 3,200. b. If the direct labor hour method is used in applying factory overhead and the predetermined rate is 10 an hour, what amount should be charged to Job 2010 for factory overhead? Assume that the direct materials used totaled 5,000, the direct labor cost totaled 3,200, and the number of direct labor hours totaled 250. c. If the machine hour method is used in applying factory overhead and the predetermined rate is 12.50 an hour, what amount should be charged to Job 2010 for factory overhead? Assume that the direct materials used totaled 5,000, the direct labor cost totaled 3,200, the direct labor hours were 250 hours, and the machine hours were 295 hours.arrow_forwardArcher Company produces leather jacket for individual and corporation. On September 1st 2016, three jobs are in process, with cost as follows in USD attached on picture below Questions : a. If the allocation base that the company use is direct materials, calculate the budgeted overhead rate b. Calculate the Manufacturing Overhead Cost for each job and the total of MOH allowed c. Calculate the total cost of WIP at the end of September 2016arrow_forwardActual costing, normal costing, accounting for manufacturing overhead. Dakota Products uses a job-costing system with two direct-cost categories (direct materials and direct manufacturing labor) and one manufacturing overhead cost pool. Dakota allocates manufacturing overhead costs using direct manufacturing labor costs. Dakota provides the following information: Budget for 2017 Actual Results for 2017 Direct material costs $2,250,000 $2,150,000 Direct manufacturing labor costs 1,700,000 1,650,000 Manufacturing overhead costs 3,060,000 3,217,500 Q. Why might managers at Dakota Products prefer to use normal costing?arrow_forward
- Actual costing, normal costing, accounting for manufacturing overhead. Dakota Products uses a job-costing system with two direct-cost categories (direct materials and direct manufacturing labor) and one manufacturing overhead cost pool. Dakota allocates manufacturing overhead costs using direct manufacturing labor costs. Dakota provides the following information: Budget for 2017 Actual Results for 2017 Direct material costs $2,250,000 $2,150,000 Direct manufacturing labor costs 1,700,000 1,650,000 Manufacturing overhead costs 3,060,000 3,217,500 Q. Compute the actual and budgeted manufacturing overhead rates for 2017.arrow_forwardJob costing, journal entries. Donald Transport assembles prestige manufactured homes. Its job costing system has two direct-cost categories (direct materials and direct manufacturing labor) and one indirect-cost pool (manufacturing overhead allocated at a budgeted $31 per machine-hour in 2017). The following data (in millions) show operation costs for 2017:arrow_forwardProducts 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 1. Compute the actual and budgeted manufacturing overhead rates for 2017. 2. 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. 3. At the end of 2017, compute the under- or overallocated manufacturing overhead under normal costing. Why is there no…arrow_forward
- Actual costing, normal costing, accounting for manufacturing overhead. Dakota Products uses a job-costing system with two direct-cost categories (direct materials and direct manufacturing labor) and one manufacturing overhead cost pool. Dakota allocates manufacturing overhead costs using direct manufacturing labor costs. Dakota provides the following information: Budget for 2017 Actual Results for 2017 Direct material costs $2,250,000 $2,150,000 Direct manufacturing labor costs 1,700,000 1,650,000 Manufacturing overhead costs 3,060,000 3,217,500 Q. At the end of 2017, compute the under- or overallocated manufacturing overhead under normal costing. Why is there no under- or overallocated manufacturing overhead under actual costing?arrow_forwardHill Manufacturing uses departmental cost driver rates to apply manufacturing overhead costs to products. Manufacturing overhead costs are applied on the basis of machine hours in the Machining Department and on the basis of direct labor hours in the Assembly Department. At the beginning of 2020, the following estimates were provided for the coming year: Direct labor hours Machine hours Direct labor cost Manufacturing overhead costs Machining Direct labor hours Machine hours Direct material cost Direct labor cost 10,000 DLH 100,000 MH $80,000 $250,000 The accounting records of the company show the following data for Job # 846: Machining 50 DLH 170 MH Assembly 90,000 DLH 5,000 MH $2,700 $400 $720,000 $360,000 Assembly 120 DLH 10 MH $1,600 $900 4 Required: 1. Compute the manufacturing overhead allocation rate for each department. 2. Compute the total cost of Job #846. 3. Provide possible reasons why Hill Manufacturing uses two different cost allocation rates.arrow_forwardActual costing, normal costing, accounting for manufacturing overhead. Dakota Products uses a job-costing system with two direct-cost categories (direct materials and direct manufacturing labor) and one manufacturing overhead cost pool. Dakota allocates manufacturing overhead costs using direct manufacturing labor costs. Dakota provides the following information: Budget for 2017 Actual Results for 2017 Direct material costs 2,250,000 2,150,000 Direct manufacturing labor costs 1,700,000 1,650,000 Manufacturing overhead costs 3,060,000 3,217,500 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 55,000 Direct manufacturing labor costs 45,000 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…arrow_forward
- Job costing, accounting for manufacturing overhead, budgeted rates. The Solomon Company uses a job-costing system at its Dover, Delaware, plant. The plant has a machining department and a nishing department. Solomon uses normal costing with two direct-cost categories (direct materials and direct manufacturing labor) and two manufacturing overhead cost pools (the machining department with machine-hours as the allocation base and the nishing department with direct manufacturing labor costs as the allocation base). The 2017 budget for the plant is as follows:arrow_forwardDesert Products uses a job-costing system with two direct-cost categories (direct materials and direct manufacturing labor) and one manufacturing overhead cost pool. Desert allocates manufacturing overhead costs using direct manufacturing labor costs. Desert provides the following information: E (Click the icon to view the information.) Read the requirements ... Requirement 1. Compute the actual and budgeted manufacturing overhead rates for 2017. (Enter your answer as a number [not as a percentage] rounded to two decimal places, X.XX.) Actual manufacturing overhead rate Budgeted manufacturing overhead rate Data Table Requirements Budget for 2017 Actual Results for 2017 Direct material costs 2,100,000 $ 2.050,000 1. Compute the actual and budgeted manufacturing overhead rates for 2017. 2. During March, the job-cost record for Job 626 contained the following information: Direct manufacturing labor costs 1,500,000 1,460,000 Direct materials used $50,000 Manufacturing overhead costs…arrow_forwardThe Maclin Company uses a job-costing system at its Dover, Delaware, plant. The plant has a machining department and a finishing department. Maclin uses normal costing with two direct-cost categories (direct materials and direct manufacturing labor) and two manufacturing overhead cost pools (the machining department withmachine-hours as the allocation base and the finishing department with direct manufacturing labor costs as the allocation base). The 2017 budget for the plant is asfollows: Machining Department Finishing Department Manufacturing overhead costs $9,180,000 $8,181,000 Direct manufacturing labor costs $920,000 $4,050,000 Direct manufacturing labor-hours 34,000 150,000 Machine-hours 180,000 37,000 Question: 5. Amounts at the end of 2017 are as follows: Machining Finishing Department Department Manufacturing overhead $10,350,000 $8,432,000 incurred Direct manufacturing labor $1,000,000 $4,100,000 costs Machine-hours 200,000 33,000 Compute the under- or overallocated…arrow_forward
- Principles of Cost AccountingAccountingISBN:9781305087408Author:Edward J. Vanderbeck, Maria R. MitchellPublisher:Cengage LearningPrinciples of Accounting Volume 2AccountingISBN:9781947172609Author:OpenStaxPublisher:OpenStax College