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Deck 9: Absorption Cost Systems
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Plantwide vs.Department Overhead Rates
Rose Bach has recently been hired as controller of Empco Inc. ,a sheet-metal manufacturer.Empco has been in the sheet-metal business for many years and is currently investigating ways to modernize its manufacturing process.At the first staff meeting Bach attended,Bob Kelley,chief engineer,presented a proposal for automating the drilling department.Kelley recommended that Empco purchase two robots that could replace the eight direct labor workers in the department.The cost savings outlined in Kelley's proposal include two elements.First,direct labor cost in the drilling department is eliminated.Second,manufacturing overhead cost in the department is reduced to zero because Empco charges manufacturing overhead on the basis of direct labor dollars using a plantwide rate.
The president of Empco felt that Kelley's explanation of the cost savings made no sense.Bach agreed and explained that as firms become more automated,they should rethink their manufacturing overhead systems.The president asked Bach to look into the matter and prepare a report for the next staff meeting.
To refresh her knowledge,Bach reviewed articles on manufacturing overhead allocation for an automated factory and discussed the matter with some of her peers.She also gathered the historical data presented below on the manufacturing overhead rates experienced by Empco over the years.Bach also wanted to have some departmental data to present at the meeting.Using Empco's accounting records,she was able to estimate the annual averages presented below for each manufacturing department in the 1990s.
Required:
a.Disregarding the proposed use of robots in the drilling department,describe the shortcomings of Empco's current system for applying overhead.
b.Do you agree with Bob Kelley's statement that the manufacturing overhead cost in the drilling department will be reduced to zero if the automation proposal is implemented? Explain.
c.Recommend ways to improve Empco's method for applying overhead by describing how it should revise its overhead accounting system:
(i)in the cutting and grinding departments.
(ii)to accommodate the automation of the drilling department.
Rose Bach has recently been hired as controller of Empco Inc. ,a sheet-metal manufacturer.Empco has been in the sheet-metal business for many years and is currently investigating ways to modernize its manufacturing process.At the first staff meeting Bach attended,Bob Kelley,chief engineer,presented a proposal for automating the drilling department.Kelley recommended that Empco purchase two robots that could replace the eight direct labor workers in the department.The cost savings outlined in Kelley's proposal include two elements.First,direct labor cost in the drilling department is eliminated.Second,manufacturing overhead cost in the department is reduced to zero because Empco charges manufacturing overhead on the basis of direct labor dollars using a plantwide rate.
The president of Empco felt that Kelley's explanation of the cost savings made no sense.Bach agreed and explained that as firms become more automated,they should rethink their manufacturing overhead systems.The president asked Bach to look into the matter and prepare a report for the next staff meeting.
To refresh her knowledge,Bach reviewed articles on manufacturing overhead allocation for an automated factory and discussed the matter with some of her peers.She also gathered the historical data presented below on the manufacturing overhead rates experienced by Empco over the years.Bach also wanted to have some departmental data to present at the meeting.Using Empco's accounting records,she was able to estimate the annual averages presented below for each manufacturing department in the 1990s.
Required:a.Disregarding the proposed use of robots in the drilling department,describe the shortcomings of Empco's current system for applying overhead.
b.Do you agree with Bob Kelley's statement that the manufacturing overhead cost in the drilling department will be reduced to zero if the automation proposal is implemented? Explain.
c.Recommend ways to improve Empco's method for applying overhead by describing how it should revise its overhead accounting system:
(i)in the cutting and grinding departments.
(ii)to accommodate the automation of the drilling department.
Question
Job Cost Flows
The job cost sheet for 1,000 units of toy trucks is:
All of the materials for the job were purchased on 4/10.The batch of 1,000 toy trucks is sold on 7/10.
What are the costs of this job order in the raw materials account,the work-in-process account,the finished goods account,and the cost of goods account on 4/30,5/31,6/30 and 7/31?
The job cost sheet for 1,000 units of toy trucks is:
All of the materials for the job were purchased on 4/10.The batch of 1,000 toy trucks is sold on 7/10.What are the costs of this job order in the raw materials account,the work-in-process account,the finished goods account,and the cost of goods account on 4/30,5/31,6/30 and 7/31?
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Question
Question
Product Profitability and Mix - Calculating Variable Overhead
Sportway Inc.is a wholesale distributor supplying a wide range of moderately priced sporting equipment to large chain stores.About 60 percent of Sportway's products are purchased from other companies and the remainder are manufactured by Sportway.The company has a plastics department that is currently manufacturing molded fishing tackle boxes.Sportway is able to manufacture and sell 8,000 tackle boxes annually,making full use of its direct labor capacity at available workstations.Presented below are the selling price and costs associated with Sportway's tackle boxes.
Because Sportway believes it could sell 12,000 tackle boxes if it had sufficient manufacturing capacity,the company has looked into the possibility of purchasing the tackle boxes for distribution.Maple Products,a steady supplier of quality products,would be able to provide up to 9,000 tackle boxes per year at a price of $68 per box delivered to Sportway's facility.
Bart Johnson,Sportway's product manager,has suggested that the company could make better use of its plastics department by manufacturing skateboards.To support his position,Johnson has a market study that indicates an expanding market for skateboards and a need for additional suppliers.Johnson believes that Sportway could expect to sell 17,500 skateboards annually at $45 per skateboard.Johnson's estimate of the costs to manufacture the skateboards follows.
In the plastics department,Sportway uses direct labor hours as the application base for manufacturing overhead.Included in manufacturing overhead for the current year is $50,000 of factorywide,fixed manufacturing overhead that has been allocated to the plastics department.For each product that Sportway sells,regardless of whether the product has been purchased or is manufactured by Sportway,a portion of the selling and administrative cost is fixed at $6 per unit.Total selling and administrative costs for the purchased tackle boxes would be $10 per unit.
Required:
Prepare an analysis based on the data presented that will show which product or products Sportway Inc.should manufacture and/or purchase to maximize the company's profitability.Show the associated financial impact.Support your answer with appropriate calculations.
Sportway Inc.is a wholesale distributor supplying a wide range of moderately priced sporting equipment to large chain stores.About 60 percent of Sportway's products are purchased from other companies and the remainder are manufactured by Sportway.The company has a plastics department that is currently manufacturing molded fishing tackle boxes.Sportway is able to manufacture and sell 8,000 tackle boxes annually,making full use of its direct labor capacity at available workstations.Presented below are the selling price and costs associated with Sportway's tackle boxes.
Because Sportway believes it could sell 12,000 tackle boxes if it had sufficient manufacturing capacity,the company has looked into the possibility of purchasing the tackle boxes for distribution.Maple Products,a steady supplier of quality products,would be able to provide up to 9,000 tackle boxes per year at a price of $68 per box delivered to Sportway's facility.Bart Johnson,Sportway's product manager,has suggested that the company could make better use of its plastics department by manufacturing skateboards.To support his position,Johnson has a market study that indicates an expanding market for skateboards and a need for additional suppliers.Johnson believes that Sportway could expect to sell 17,500 skateboards annually at $45 per skateboard.Johnson's estimate of the costs to manufacture the skateboards follows.
In the plastics department,Sportway uses direct labor hours as the application base for manufacturing overhead.Included in manufacturing overhead for the current year is $50,000 of factorywide,fixed manufacturing overhead that has been allocated to the plastics department.For each product that Sportway sells,regardless of whether the product has been purchased or is manufactured by Sportway,a portion of the selling and administrative cost is fixed at $6 per unit.Total selling and administrative costs for the purchased tackle boxes would be $10 per unit.Required:
Prepare an analysis based on the data presented that will show which product or products Sportway Inc.should manufacture and/or purchase to maximize the company's profitability.Show the associated financial impact.Support your answer with appropriate calculations.
Question
Prorating Over/Underabsorbed Overhead
A computer manufacturer has the following account balances at the end of the year.
These accounts contain $500,000 of allocated overhead.Actual overhead,however,is $600,000.
What are the account balances after prorating the underabsorbed overhead?
A computer manufacturer has the following account balances at the end of the year.
These accounts contain $500,000 of allocated overhead.Actual overhead,however,is $600,000.What are the account balances after prorating the underabsorbed overhead?
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Deck 9: Absorption Cost Systems
1
Over/Underabsorbed Overhead
The Alphonse Company allocates fixed overhead costs by machine hours and variable overhead costs by direct labor hours.At the beginning of the year the company expects fixed overhead costs to be $600,000 and variable costs to be $800,000.The expected machine hours are 6,000 and the expected direct labor hours are 80,000.The actual fixed overhead costs are $700,000 and the actual variable overhead costs are $750,000.The actual machine hours during the year are 5,500 and the actual direct labor hours are 90,000.
Required:
a.How much overhead is allocated?
b.What is the over/underabsorbed overhead?
The Alphonse Company allocates fixed overhead costs by machine hours and variable overhead costs by direct labor hours.At the beginning of the year the company expects fixed overhead costs to be $600,000 and variable costs to be $800,000.The expected machine hours are 6,000 and the expected direct labor hours are 80,000.The actual fixed overhead costs are $700,000 and the actual variable overhead costs are $750,000.The actual machine hours during the year are 5,500 and the actual direct labor hours are 90,000.
Required:
a.How much overhead is allocated?
b.What is the over/underabsorbed overhead?
Solution to Over/Underabsorbed Overhead (10 minutes)
a.
b. 
a.
b. 2
Plantwide vs.Department Overhead Rates
Rose Bach has recently been hired as controller of Empco Inc. ,a sheet-metal manufacturer.Empco has been in the sheet-metal business for many years and is currently investigating ways to modernize its manufacturing process.At the first staff meeting Bach attended,Bob Kelley,chief engineer,presented a proposal for automating the drilling department.Kelley recommended that Empco purchase two robots that could replace the eight direct labor workers in the department.The cost savings outlined in Kelley's proposal include two elements.First,direct labor cost in the drilling department is eliminated.Second,manufacturing overhead cost in the department is reduced to zero because Empco charges manufacturing overhead on the basis of direct labor dollars using a plantwide rate.
The president of Empco felt that Kelley's explanation of the cost savings made no sense.Bach agreed and explained that as firms become more automated,they should rethink their manufacturing overhead systems.The president asked Bach to look into the matter and prepare a report for the next staff meeting.
To refresh her knowledge,Bach reviewed articles on manufacturing overhead allocation for an automated factory and discussed the matter with some of her peers.She also gathered the historical data presented below on the manufacturing overhead rates experienced by Empco over the years.Bach also wanted to have some departmental data to present at the meeting.Using Empco's accounting records,she was able to estimate the annual averages presented below for each manufacturing department in the 1990s.
Required:
a.Disregarding the proposed use of robots in the drilling department,describe the shortcomings of Empco's current system for applying overhead.
b.Do you agree with Bob Kelley's statement that the manufacturing overhead cost in the drilling department will be reduced to zero if the automation proposal is implemented? Explain.
c.Recommend ways to improve Empco's method for applying overhead by describing how it should revise its overhead accounting system:
(i)in the cutting and grinding departments.
(ii)to accommodate the automation of the drilling department.
Rose Bach has recently been hired as controller of Empco Inc. ,a sheet-metal manufacturer.Empco has been in the sheet-metal business for many years and is currently investigating ways to modernize its manufacturing process.At the first staff meeting Bach attended,Bob Kelley,chief engineer,presented a proposal for automating the drilling department.Kelley recommended that Empco purchase two robots that could replace the eight direct labor workers in the department.The cost savings outlined in Kelley's proposal include two elements.First,direct labor cost in the drilling department is eliminated.Second,manufacturing overhead cost in the department is reduced to zero because Empco charges manufacturing overhead on the basis of direct labor dollars using a plantwide rate.
The president of Empco felt that Kelley's explanation of the cost savings made no sense.Bach agreed and explained that as firms become more automated,they should rethink their manufacturing overhead systems.The president asked Bach to look into the matter and prepare a report for the next staff meeting.
To refresh her knowledge,Bach reviewed articles on manufacturing overhead allocation for an automated factory and discussed the matter with some of her peers.She also gathered the historical data presented below on the manufacturing overhead rates experienced by Empco over the years.Bach also wanted to have some departmental data to present at the meeting.Using Empco's accounting records,she was able to estimate the annual averages presented below for each manufacturing department in the 1990s.
Required:a.Disregarding the proposed use of robots in the drilling department,describe the shortcomings of Empco's current system for applying overhead.
b.Do you agree with Bob Kelley's statement that the manufacturing overhead cost in the drilling department will be reduced to zero if the automation proposal is implemented? Explain.
c.Recommend ways to improve Empco's method for applying overhead by describing how it should revise its overhead accounting system:
(i)in the cutting and grinding departments.
(ii)to accommodate the automation of the drilling department.
Solution to Plantwide vs.Department Overhead Rates (CMA adapted)(20 minutes)
a.Empco Inc.is currently using a plantwide overhead rate that is applied on the basis of direct labor dollars.In general,a plantwide manufacturing overhead rate is acceptable only if a similar relation between overhead and direct labor exists in all departments,or if the company manufactures products which receive proportional services from each department.
In some cases,departmental overhead rates are preferable to plantwide overhead rates because plantwide overhead rates do not provide:
• a framework for reviewing overhead costs (performance evaluation)on a departmental basis,identifying departmental cost overruns,or taking corrective action to improve departmental cost control.
• sufficient information about product profitability,thus increasing the difficulties associated with management decision making.
b.Because Empco uses a plantwide overhead rate applied on the basis of direct labor dollars,the elimination of direct labor in the Drilling Department through the introduction of robots may appear to reduce the overhead cost of the Drilling Department to zero.However,this change will not reduce fixed manufacturing expenses such as depreciation,plant supervision,etc.In reality,the use of robots is likely to increase fixed expenses because of increased depreciation expense.Under Empco's current method of allocating overhead costs,the remaining departments will merely absorb these costs.
c.(i)In order to improve the allocation of overhead costs in the Cutting and Grinding Departments,Empco should:
• establish separate overhead accounts (pools)and rates for each of these departments.
• select an application basis for each of these departments that best reflects the relation of the departmental activity to the overhead costs incurred (e.g. ,direct labor hours,machine hours,etc. )
• identify,if possible,fixed and variable overhead costs and establish fixed and variable overhead rates.
(ii)In order to accommodate the automation of the Drilling Department in its overhead accounting system,Empco should:
• establish separate overhead accounts (pools)and rates for the Drilling Department.
• identify,if possible,fixed and variable overhead costs and establish fixed and variable overhead rates.
• apply overhead costs to the Drilling Department on the basis of robot or machine hours.
a.Empco Inc.is currently using a plantwide overhead rate that is applied on the basis of direct labor dollars.In general,a plantwide manufacturing overhead rate is acceptable only if a similar relation between overhead and direct labor exists in all departments,or if the company manufactures products which receive proportional services from each department.
In some cases,departmental overhead rates are preferable to plantwide overhead rates because plantwide overhead rates do not provide:
• a framework for reviewing overhead costs (performance evaluation)on a departmental basis,identifying departmental cost overruns,or taking corrective action to improve departmental cost control.
• sufficient information about product profitability,thus increasing the difficulties associated with management decision making.
b.Because Empco uses a plantwide overhead rate applied on the basis of direct labor dollars,the elimination of direct labor in the Drilling Department through the introduction of robots may appear to reduce the overhead cost of the Drilling Department to zero.However,this change will not reduce fixed manufacturing expenses such as depreciation,plant supervision,etc.In reality,the use of robots is likely to increase fixed expenses because of increased depreciation expense.Under Empco's current method of allocating overhead costs,the remaining departments will merely absorb these costs.
c.(i)In order to improve the allocation of overhead costs in the Cutting and Grinding Departments,Empco should:
• establish separate overhead accounts (pools)and rates for each of these departments.
• select an application basis for each of these departments that best reflects the relation of the departmental activity to the overhead costs incurred (e.g. ,direct labor hours,machine hours,etc. )
• identify,if possible,fixed and variable overhead costs and establish fixed and variable overhead rates.
(ii)In order to accommodate the automation of the Drilling Department in its overhead accounting system,Empco should:
• establish separate overhead accounts (pools)and rates for the Drilling Department.
• identify,if possible,fixed and variable overhead costs and establish fixed and variable overhead rates.
• apply overhead costs to the Drilling Department on the basis of robot or machine hours.
3
Job Cost Flows
The job cost sheet for 1,000 units of toy trucks is: All of the materials for the job were purchased on 4/10.The batch of 1,000 toy trucks is sold on 7/10.
What are the costs of this job order in the raw materials account,the work-in-process account,the finished goods account,and the cost of goods account on 4/30,5/31,6/30 and 7/31?
The job cost sheet for 1,000 units of toy trucks is:
All of the materials for the job were purchased on 4/10.The batch of 1,000 toy trucks is sold on 7/10.What are the costs of this job order in the raw materials account,the work-in-process account,the finished goods account,and the cost of goods account on 4/30,5/31,6/30 and 7/31?
Solution to Job Cost Flows (15 minutes) 
4
Absorption Costing in a Bank
First Eastern Bank is a large,multibranch bank offering a wide variety of commercial and retail banking services.Eastern uses an absorption costing system to monitor the costs of various services and provide information for a variety of decisions.
One set of services is a retail loan operation providing residential mortgages,car loans,and student college loans.All loan applications are filed by the applicant at a branch bank,where the branch manager fills out the loan application.From there,the loan application is sent to the loan processing department,where the applicant's credit history is checked and a recommendation is made regarding loan approval based on the applicant's credit history and current financial situation.This recommendation is forwarded to the loan committee of senior lending officers,who review the file and make a final decision.
Thus,there are three stages to making a loan:application in a branch,the loan processing department,and the loan committee.Mr.and Mrs.Jones visit the West Street branch and file an application for a residential mortgage.The Jones's loan application is processed through the three stages.
• West Street Branch Bank.The branch manager spends one hour taking the application.The branch manager spends 1,000 hours per year of her total time taking loan applications and the remainder of her time providing other direct services to customers.Total overhead in the West Street Branch is budgeted to be $259,000,excluding the manager's salary,and is allocated to direct customer services using the branch manager's time spent providing direct customer services.The branch manager's annual salary is $42,600.
• Processing department.The processing department budgets its total overhead for the year to be $800,000,which is allocated to loans processed using direct labor hours.Budgeted direct labor hours for the year are 40,000 hours.Direct labor hours in the processing department cost $18 per hour.The Jones's loan requires five direct labor hours in the loan processing department.
• Loan committee.Ten senior bank executives are on the loan committee.The loan committee meets 52 times per year,every Wednesday,all day,to approve all loans.The average salary and benefits of each member of the loan committee are $104,000.The loan committee spends 15 minutes reviewing the Jones's loan application before approving it.
For costing purposes,all employees are assumed to work eight-hour days,five days per week,52 weeks per year.
Required:
Calculate the total cost of taking the application,processing,and approving the Joneses' mortgage.
First Eastern Bank is a large,multibranch bank offering a wide variety of commercial and retail banking services.Eastern uses an absorption costing system to monitor the costs of various services and provide information for a variety of decisions.
One set of services is a retail loan operation providing residential mortgages,car loans,and student college loans.All loan applications are filed by the applicant at a branch bank,where the branch manager fills out the loan application.From there,the loan application is sent to the loan processing department,where the applicant's credit history is checked and a recommendation is made regarding loan approval based on the applicant's credit history and current financial situation.This recommendation is forwarded to the loan committee of senior lending officers,who review the file and make a final decision.
Thus,there are three stages to making a loan:application in a branch,the loan processing department,and the loan committee.Mr.and Mrs.Jones visit the West Street branch and file an application for a residential mortgage.The Jones's loan application is processed through the three stages.
• West Street Branch Bank.The branch manager spends one hour taking the application.The branch manager spends 1,000 hours per year of her total time taking loan applications and the remainder of her time providing other direct services to customers.Total overhead in the West Street Branch is budgeted to be $259,000,excluding the manager's salary,and is allocated to direct customer services using the branch manager's time spent providing direct customer services.The branch manager's annual salary is $42,600.
• Processing department.The processing department budgets its total overhead for the year to be $800,000,which is allocated to loans processed using direct labor hours.Budgeted direct labor hours for the year are 40,000 hours.Direct labor hours in the processing department cost $18 per hour.The Jones's loan requires five direct labor hours in the loan processing department.
• Loan committee.Ten senior bank executives are on the loan committee.The loan committee meets 52 times per year,every Wednesday,all day,to approve all loans.The average salary and benefits of each member of the loan committee are $104,000.The loan committee spends 15 minutes reviewing the Jones's loan application before approving it.
For costing purposes,all employees are assumed to work eight-hour days,five days per week,52 weeks per year.
Required:
Calculate the total cost of taking the application,processing,and approving the Joneses' mortgage.
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5
Incentives and Depreciation Methods
What conditions are likely to exist when operating managers are compensated based on accounting earnings and accelerated depreciation methods are used to compute overhead charges to operating departments?
What conditions are likely to exist when operating managers are compensated based on accounting earnings and accelerated depreciation methods are used to compute overhead charges to operating departments?
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6
Product Profitability and Mix - Calculating Variable Overhead
Sportway Inc.is a wholesale distributor supplying a wide range of moderately priced sporting equipment to large chain stores.About 60 percent of Sportway's products are purchased from other companies and the remainder are manufactured by Sportway.The company has a plastics department that is currently manufacturing molded fishing tackle boxes.Sportway is able to manufacture and sell 8,000 tackle boxes annually,making full use of its direct labor capacity at available workstations.Presented below are the selling price and costs associated with Sportway's tackle boxes. Because Sportway believes it could sell 12,000 tackle boxes if it had sufficient manufacturing capacity,the company has looked into the possibility of purchasing the tackle boxes for distribution.Maple Products,a steady supplier of quality products,would be able to provide up to 9,000 tackle boxes per year at a price of $68 per box delivered to Sportway's facility.
Bart Johnson,Sportway's product manager,has suggested that the company could make better use of its plastics department by manufacturing skateboards.To support his position,Johnson has a market study that indicates an expanding market for skateboards and a need for additional suppliers.Johnson believes that Sportway could expect to sell 17,500 skateboards annually at $45 per skateboard.Johnson's estimate of the costs to manufacture the skateboards follows. In the plastics department,Sportway uses direct labor hours as the application base for manufacturing overhead.Included in manufacturing overhead for the current year is $50,000 of factorywide,fixed manufacturing overhead that has been allocated to the plastics department.For each product that Sportway sells,regardless of whether the product has been purchased or is manufactured by Sportway,a portion of the selling and administrative cost is fixed at $6 per unit.Total selling and administrative costs for the purchased tackle boxes would be $10 per unit.
Required:
Prepare an analysis based on the data presented that will show which product or products Sportway Inc.should manufacture and/or purchase to maximize the company's profitability.Show the associated financial impact.Support your answer with appropriate calculations.
Sportway Inc.is a wholesale distributor supplying a wide range of moderately priced sporting equipment to large chain stores.About 60 percent of Sportway's products are purchased from other companies and the remainder are manufactured by Sportway.The company has a plastics department that is currently manufacturing molded fishing tackle boxes.Sportway is able to manufacture and sell 8,000 tackle boxes annually,making full use of its direct labor capacity at available workstations.Presented below are the selling price and costs associated with Sportway's tackle boxes.
Because Sportway believes it could sell 12,000 tackle boxes if it had sufficient manufacturing capacity,the company has looked into the possibility of purchasing the tackle boxes for distribution.Maple Products,a steady supplier of quality products,would be able to provide up to 9,000 tackle boxes per year at a price of $68 per box delivered to Sportway's facility.Bart Johnson,Sportway's product manager,has suggested that the company could make better use of its plastics department by manufacturing skateboards.To support his position,Johnson has a market study that indicates an expanding market for skateboards and a need for additional suppliers.Johnson believes that Sportway could expect to sell 17,500 skateboards annually at $45 per skateboard.Johnson's estimate of the costs to manufacture the skateboards follows.
In the plastics department,Sportway uses direct labor hours as the application base for manufacturing overhead.Included in manufacturing overhead for the current year is $50,000 of factorywide,fixed manufacturing overhead that has been allocated to the plastics department.For each product that Sportway sells,regardless of whether the product has been purchased or is manufactured by Sportway,a portion of the selling and administrative cost is fixed at $6 per unit.Total selling and administrative costs for the purchased tackle boxes would be $10 per unit.Required:
Prepare an analysis based on the data presented that will show which product or products Sportway Inc.should manufacture and/or purchase to maximize the company's profitability.Show the associated financial impact.Support your answer with appropriate calculations.
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7
Prorating Over/Underabsorbed Overhead
A computer manufacturer has the following account balances at the end of the year. These accounts contain $500,000 of allocated overhead.Actual overhead,however,is $600,000.
What are the account balances after prorating the underabsorbed overhead?
A computer manufacturer has the following account balances at the end of the year.
These accounts contain $500,000 of allocated overhead.Actual overhead,however,is $600,000.What are the account balances after prorating the underabsorbed overhead?
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8
Job Order Sheet
The Talbott Company has received an order (#324)for 100 widgets.On January 20 the shop supervisor requisitioned 100 units of part 503 at a cost of $5 per unit and 500 units part 456 at a cost of $3 per unit to begin work on the 100 widgets.On the same day 20 hours of direct labor at $20 per hour are used to work on the widgets.On January 21,200 units of part 543 at $6 per unit are requisitioned and 10 hours of direct labor at $15 per hour are performed on the 100 units of widgets to complete the job.Overhead is allocated to the job based on $5 per direct labor hour.
Required:
Make a job order cost sheet for the 100 widgets.
The Talbott Company has received an order (#324)for 100 widgets.On January 20 the shop supervisor requisitioned 100 units of part 503 at a cost of $5 per unit and 500 units part 456 at a cost of $3 per unit to begin work on the 100 widgets.On the same day 20 hours of direct labor at $20 per hour are used to work on the widgets.On January 21,200 units of part 543 at $6 per unit are requisitioned and 10 hours of direct labor at $15 per hour are performed on the 100 units of widgets to complete the job.Overhead is allocated to the job based on $5 per direct labor hour.
Required:
Make a job order cost sheet for the 100 widgets.
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