The company has traditionally used a plantwide manufacturing overhead rate based on machine hours to allocate manufacturing
Question:
The company has traditionally used a plantwide manufacturing overhead rate based on machine hours to allocate manufacturing overhead to its products. The company estimates that it will incur
$ 1 comma 560 comma 000$1,560,000
in total manufacturing overhead costs in the upcoming year and will use
8 comma 0008,000
machine hours.
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Expected usage and costs for manufacturing overhead activities for the upcoming year are as follows:
Estimated Activity
Description of Cost Pool
Estimated Cost
Cost Driver
for this Year
Machine maintenance costs. . . . . . . .
$320,000
Number of machine hours. . . . . . . . . . . . . . .
8,000
Engineering change orders. . . . . . . .
$50,000
Number of change orders. . . . . . . . . . . . .
1,000
Hazardous waste disposal. . . . . . . . .
$1,190,000
Pounds of hazardous materials generated. .
3,500
Total overhead cost. . . . . . . . . . . . . . .
$1,560,000
(Click the icon to view the expected usage and costs.)During the year,
Job 356Job 356
is started and completed. Usage for this job follows:
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(Click the icon to view the usage for
Job 356Job 356.)
310 pounds of direct materials at $70 per pound
20 direct labor hours used at $45 per labor hour
80 machine hours used
8 change orders
60 pounds of hazardous waste generated
Requirement 1. Calculate the cost of
Job 356Job 356
using the traditional plantwide manufacturing overhead rate based on machine hours.Begin by calculating the plantwide overhead rate. First identify the formula used to compute the plantwide overhead rate, then compute the rate. (Abbreviations used: MOH = manufacturing overhead; mfg. = manufacturing)
/ | = | Plantwide mfg. overhead rate |
/ | = |
Job 356Job 356.
Job Cost Record | Manufacturing |
JOB 356 | Costs |
Total job cost |
Job 356Job 356
using activity-based costing.Begin by calculating the allocation rate for each activity. First determine the formula to compute the allocation rate in an activity-based costing system, then compute the rate for each activity. (Abbreviations used: est. = estimated, MH=machine hours, Mach.=Machine, Eng.=Engineering)
Activity cost | |||||
/ | = | allocation rate |
Mach. maintenance | / | = | per MH |
Eng. change orders | / | = | per order |
Waste disposal | / | = | per pound |
Job 356Job 356
using activity-based costing.Job Cost Record | Manufacturing |
JOB 356 | Costs |
Total job cost |
Requirement 3. If you were a manager, which cost estimate would provide you more useful information? How might you use this information?
Financial and Managerial Accounting
ISBN: 978-0132497978
3rd Edition
Authors: Horngren, Harrison, Oliver