All costs incidental to materials procurement and handling until they are issued are charged to the materials
Question:
All costs incidental to materials procurement and handling until they are issued are charged to the materials account by Cruz Mfg. Co. at a rate predetermined for each of the departments involved.
For 2018, the estimated departmental costs are given:
Purchasing department------------------------------------------------------ P350,000
Receiving and Inspection Dept. ----------------------------------------------249,000
Materials department----------------------------------------------------------- 166,000
Accounting department (20% is estimated to be related
to processing of payments for materials.)--------------------------------- 590,000
Purchases for 2018 were estimated to amount to P 10,000,000 for more or less 8,300,000 units to be ordered 50 times.
Actual purchases for 2018 amounted to P11,200,000 for total of 8,000,000 units in 52 orders. Costs incurred by the four given departments were as follows:
Purchasing department--------------------------------------------------- P360,000
Receiving and inspection department---------------------------------- 256,000
Materials department --------------------------------------------------------156,000
Accounting department (20% is estimated to be related
to processing of payments for materials. -------------------------------580,000
Required:
a. Compute for the predetermined departmental overhead rates.
b. How much is the applied material handling cost per department?
c. How much is the material handling variance?
Cost management a strategic approach
ISBN: 978-0073526942
5th edition
Authors: Edward J. Blocher, David E. Stout, Gary Cokins