Kalor Ltd. uses a normal job-costing system with two direct cost categories, direct materials and direct labour,
Question:
Budgeted Fabrication Assembly
Direct Materials (DM)..................$3,500,000.............$2,100,000
Direct Labour..............................$ 735,000.............$3,825,000
Factory Overhead........................$6,450,000............$1,530,000
Machine-Hours (MH).....................2,580,000...............250,000
Kalor started the year without any work-in-process. During the year it had the following results:
Actual Fabrication Assembly
Direct Materials (DM).........$3,350,000.............$2,200,000
Direct Labour.....................$ 750,000............$3,750,000
Factory Overhead...............$6,390,000............$1,590,000
Machine-Hours (MH).............2,610,000...............260,000
At December 31, 2016, the company had only two jobs still in process, #Z438 and #Q917. Job #Z438 had $7,000 of direct materials and $1,500 of direct labour and had used 3,400 MH in fabrication. It had not yet been transferred to the Assembly Department. Job #Q917 had incurred $4,000 and $6,000 of direct materials costs in Fabrication and Assembly, respectively. It had used 1,800 MH in Fabrication and 800 MH in Assembly. Labour charges in the two departments were $9,000 and $18,000 for Fabrication and Assembly, respectively.
Required
1. Calculate Cost of Goods Manufactured for the year ended December 31, 2016, assuming the company uses its current overhead costing method.
2. Under the current costing system, what is the amount of over allocated or under allocated overhead?
3. What would be the amount of over allocated or under allocated overhead at the end of the year if the company had used departmental overhead rates with the most appropriate base for each department?
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Related Book For
Cost Accounting A Managerial Emphasis
ISBN: 978-0133138443
7th Canadian Edition
Authors: Srikant M. Datar, Madhav V. Rajan, Charles T. Horngren, Louis Beaubien, Chris Graham
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