Lynn Company uses a normal labor costing system at its Minneapolis plant. The factory has a machining department and an assembly department. Your job costing system has two categories of direct costs (direct materials and direct manufacturing labor) and two pools of indirect manufacturing costs (the overhead costs of the machining department, allocated to work in based on actual machine hours and assembly department overhead allocated to jobs based on actual direct manufacturing labor costs). The 2014 plant budget is as follows: Machining department Assembly department Manufacturing overhead $1,800,000 $3,600,000 Direct manufacturing labor costs $1,400,000 $2,000,000 Hours Work Hours Direct Manufacturing 100,000 200,000 Machine Hours 50,000 200,000 Required: 1. Calculate the default overhead rate for each department. 2. In February, the labor cost record for job 494 contained the following: Machining department Assembly department Direct materials used $45,000 $70,000 Direct labor costs manufacturing overhead $14,000 $15,000 Labor hours direct manufacturing labor 1000 1500 Machine hours 2000 1000 Calculate the total manufacturing overhead allocated to labor 494. 3. At the end of 2014, manufacturing overhead actual were $2,100,000 in machining and $3,700,000 in assembly. Assume that 55,000 actual machine hours were used for machining and the actual direct manufacturing labor costs for assembly were $2,200,000. Calculate over- or under-applied manufacturing overhead for each department.
Instructions are listed below. Explanation: Provide the following information: Department A Department B Overhead (expected) $120,000 $80,000 Normal business (machine hours) 16,000 5,800 A) To calculate the overhead rate for the entire plant , we need to use the following formula: Estimated Manufacturing Overhead Rate = Total Estimated Overhead for the Period / Total Allocation Base Amount Estimated Manufacturing Overhead Rate = (120,000 + 80,000) / (16,000 + 5,800) = $9.17 per machine hour B) We need to use the same formula, but for each department: Department A: Estimated manufacturing overhead rate = 120,000/16,000 = $7.5 per machine hour Department B: Estimated manufacturing overhead rate = 80,000/5,800 = $13.79 per machine hour
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Part 1. Calculating the total cost of the 9-601 task Total cost = unit cost of the 9-601 task × units produced = $30,240 × 1,000 = $30,240,000 Part 2. Calculating the manufacturing cost per unit for Task 9-601 Direct Materials $12,000
Direct labor cost:
Department A (450 hours @ $18) $8,100
Department B (120 hours @ $18) $2,160 Main cost $22,260 Manufacturing overhead: Department A (450 hours @ $14) $6,300 Department B (120 hours @ $14) $1,680 Unit cost manufacturing cost $30,240 Part 3 9-601 Calculating total labor cost Total cost = 9 -601 Unit labor cost × Units produced = $24,930 × 1,000 = $24,930,000 Part 4. Calculating manufacturing cost per unit for work 9-601. Direct Materials $12,000
Direct labor cost:
Department A (450 hours @ $18) $8,100
Department B (120 hours at $18) $2,160 Main cost $22,260 Manufacturing overhead: Department A (450 hours at $3) $1,350 Department B (120 hours at $11) $1,320 Unit cost $24,930 Explanation: Part 1. Calculating the total cost of 9-601 labor Total cost = Unit cost of 9-601 labor × Units produced Part 2. Calculating the unit manufacturing cost for 9-601 labor Addition of all manufacturing costs (direct and indirect) gives the unit manufacturing cost. Note: Overhead is applied using a plant-wide overhead rate of $14.00 per direct labor hour for Department A and Department B Part 3. Cost Calculation Total Labor 9-601 Total Cost = Unit Cost of Labor 9-601 × Units Produced of Part 4. Calculation of Unit Manufacturing Cost for Job 9-601. The addition of all manufacturing costs (direct and indirect) gives the unit manufacturing cost. Note: Overhead costs are applied as follows: In Department A, overhead is applied at the rate of $3 per direct labor hour. In Department B, overhead is applied at the rate of $11.00 per machine hour.
Watkins Machinery Company 1. Work in progress ending balance: = Service 102 = $86,800 2. Total ending balance = $180,800 3. Overhead variance = $63,000 (92,000 – 155,000) overapplied 4. Overhead Variance Closing for Cost of Goods Sold: Cost of Goods Sold: Labor 100 $26,000 Labor 101,154,800 Total $180,800 less overapplied overhead (63 000) Adjusted cost of goods sold $117,800 Daily entry: Debit Overcharged overhead $63,000 Credit Cost of goods sold $63,000 goods sold. Adjusted cost of goods sold $117,800 Explanation: March trial balance: Material inventory (X, $9,000; Y, $6,000; Indirect materials, $15,000) $30,000
Inventory of work in progress (this is work 101) 15,600
Finished Goods Inventory (this is work 100) 26,000 Material Inventory: XY Indirect Total Indirect from US$ 9,000 $15,000 $30,000 Purchase 30,000 30,000 15,000 75,000 Issue 24,000 15,000 24,000 63,000 Ending inventory 15,000 $20 $0
Material O 12,000 3,000 15,000
Subtotal $27,000 $12,000 $39,000
Indirect materials 24,000
Total $63,000 Job 100 Labor 101 Labor 102 Total Finished Goods 26,000 WIP 15,600 Direct Materials 27,000 $12,000 $39,000 Factory Labor 31,200 20,800 52,000 Factory Overhead Allocation: 81,000 54,000 135,000 $180,800 less over-applied overhead (63,000) Adjusted cost of goods sold $117,800 Committed machine hours 5,400 hours 3,600 hours 9,000 hours Default rate = $15 per machine hour Factory overhead: Indirect materials 23,000 Indirect labor 15,000
Amortization 45,000
Insurance 7,500 54,000 Total factory overhead $92,000 Applied factory overhead 155,000 Applied factory overhead greater than 63,000