ABC Company manufactures custom-built conveyor systems for factory and commercial operations. Lisa French is the cost accountant for ABC and she is in the process of educating a new employee, Julie English, about the job order costing system that ABC uses. (The system is based on normal costs; overhead is applied based on direct labor cost and rounded to the next whole peso.) Lisa gathers the following job order cost records for May: Direct Direct Total Job No. Materials Labor Applied OH Cost 667 ₱ 5,901 ₱1,730 ₱ 1,990 ₱ 9,621 669 18,312 1,810 2,082 22,204 670 406 500 575 1,481 671 51,405 9,500 10,925 71,830 672 9,615 550 633 10,798 To explain the missing job number, Lisa informed Julie that Job #668 had been completed in April. She also told her that Job #667 was the only job in process at the beginning of May. At that time, the job had been assigned ₱4,300 for direct material and ₱900 for direct labor. At the end of May, Job #671 had not been completed; all others had. Lisa asked Julie several questions to determine whether she understood the job order system. Required: a. What is the predetermined overhead rate used by ABC Company? b. What was the total cost of beginning Work in Process inventory? c. What was total prime cost incurred for the month of May? d. What was cost of goods manufactured for May?
Question
ABC Company manufactures custom-built conveyor systems for factory and commercial operations. Lisa French is the cost accountant for ABC and she is in the process of educating a new employee, Julie English, about the job order costing system that ABC uses. (The system is based on normal costs; overhead is applied based on direct labor cost and rounded to the next whole peso.) Lisa gathers the following job order cost records for May: Direct Direct Total Job No. Materials Labor Applied OH Cost 667 ₱ 5,901 ₱1,730 ₱ 1,990 ₱ 9,621 669 18,312 1,810 2,082 22,204 670 406 500 575 1,481 671 51,405 9,500 10,925 71,830 672 9,615 550 633 10,798 To explain the missing job number, Lisa informed Julie that Job #668 had been completed in April. She also told her that Job #667 was the only job in process at the beginning of May. At that time, the job had been assigned ₱4,300 for direct material and ₱900 for direct labor. At the end of May, Job #671 had not been completed; all others had. Lisa asked Julie several questions to determine whether she understood the job order system. Required: a. What is the predetermined overhead rate used by ABC Company? b. What was the total cost of beginning Work in Process inventory? c. What was total prime cost incurred for the month of May? d. What was cost of goods manufactured for May?
Solution
a. The predetermined overhead rate is calculated by dividing the total applied overhead by the total direct labor cost. From the data provided, we can calculate the total applied overhead (₱1,990 + ₱2,082 + ₱575 + ₱10,925 + ₱633 = ₱16,205) and the total direct labor cost (₱1,730 + ₱1,810 + ₱500 + ₱9,500 + ₱550 = ₱14,090). Therefore, the predetermined overhead rate is ₱16,205 / ₱14,090 = 1.15 or 115%.
b. The total cost of beginning Work in Process inventory is the sum of the direct material and direct labor costs assigned to Job #667 at the beginning of May. This is ₱4,300 for direct material and ₱900 for direct labor, giving a total of ₱5,200.
c. The total prime cost incurred for the month of May is the sum of the direct material and direct labor costs for all jobs. From the data provided, we can calculate the total direct material cost (₱5,901 + ₱18,312 + ₱406 + ₱51,405 + ₱9,615 = ₱85,639) and the total direct labor cost (₱1,730 + ₱1,810 + ₱500 + ₱9,500 + ₱550 = ₱14,090). Therefore, the total prime cost is ₱85,639 + ₱14,090 = ₱99,729.
d. The cost of goods manufactured for May is the total cost of all jobs completed during the month. This includes Jobs #667, #669, and #672. The total cost of these jobs is ₱9,621 + ₱22,204 + ₱10,798 = ₱42,623.
Similar Questions
ABC Company uses a predetermined overhead rate of $10 per direct labor hour. Actual manufacturing overhead incurred during October amounted to $35,000 when ABC worked 3,200 direct labor hours. At the end of October, the Manufacturing overhead account has a balance of $ that is (underapplied/overapplied).
ABC Company purchased a machine for ₱1,260,000 that was placed in service at year-end. The entity incurred additional cost for this machine:Shipping30,000Installation40,000Testing50,000Compute the amount to be reported as machinery.
If ABC Company determines its cost per unit for July's production is $28.75 and it produced 12,600 units, ABC's total manufacturing costs (direct materials, direct labor, and manufacturing overhead) incurred in July is $.
Following are ABC Company's production costs for January:Direct Materials $83,000Direct Labor $39,000Manufacturing Overhead $5,200Calculate the total cost that can be directly traced to specific products in the production process.
ABC Company uses machine hours to apply manufacturing overhead to units produced. If ABC estimates that it will generate 560,000 machine hours and incur $6,720,000 in manufacturing overhead costs during the year, its predetermined overhead application rate will be $ per hour.
Upgrade your grade with Knowee
Get personalized homework help. Review tough concepts in more detail, or go deeper into your topic by exploring other relevant questions.