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Company produces pipes for​ concert-quality organs. Each job is unique. In April 2021, it completed all outstanding​ orders, and​ then, in May 2021​, it worked on only two​ jobs, M1 and​ M2:Rafael Company, May 2021 Job M1 Job M2Direct materials $79,000 $56,000Direct manufacturing labour $277,000 $205,000Direct manufacturing labour is paid at the rate of $25 per hour. Manufacturing overhead costs are allocated at a budgeted rate of $16 per direct manufacturing​ labour-hour. Only Job M1 was completed in May. Compute the total cost for Job M1.

Question

Company produces pipes for​ concert-quality organs. Each job is unique. In April 2021, it completed all outstanding​ orders, and​ then, in May 2021​, it worked on only two​ jobs, M1 and​ M2:Rafael Company, May 2021 Job M1 Job M2Direct materials 79,00079,000 56,000Direct manufacturing labour 277,000277,000 205,000Direct manufacturing labour is paid at the rate of 25perhour.Manufacturingoverheadcostsareallocatedatabudgetedrateof25 per hour. Manufacturing overhead costs are allocated at a budgeted rate of 16 per direct manufacturing​ labour-hour. Only Job M1 was completed in May. Compute the total cost for Job M1.

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Solution

To compute the total cost for Job M1, we need to add up the direct materials, direct manufacturing labor, and manufacturing overhead costs.

  1. Direct materials for Job M1 is given as $79,000.

  2. Direct manufacturing labor for Job M1 is given as $277,000.

  3. To calculate the manufacturing overhead costs, we first need to find out how many labor hours were spent on Job M1. We do this by dividing the direct manufacturing labor cost by the hourly rate.

    So, Labor hours for Job M1 = Direct manufacturing labor cost / Hourly rate = 277,000/277,000 / 25 = 11,080 hours

  4. Now, we can calculate the manufacturing overhead costs by multiplying the labor hours by the overhead rate.

    So, Manufacturing overhead costs for Job M1 = Labor hours * Overhead rate = 11,080 hours * 16/hour=16/hour = 177,280

  5. Finally, we add up all these costs to get the total cost for Job M1.

    So, Total cost for Job M1 = Direct materials + Direct manufacturing labor + Manufacturing overhead costs = 79,000+79,000 + 277,000 + 177,280=177,280 = 533,280

Therefore, the total cost for Job M1 is $533,280.

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