3. Job-Order Costing and Cost Classification

Owly Company manufacture customized components. During this month, the company worked on three jobs and recorded the following:

1) Compute the estimated total manufacturing overhead

2) Find the appropriate allocation base for the manufacturing overhead. Provide quantitative support for your choice (hint: you can plot the data, apply high-low method, or estimate regression lines).

3) Provide the linear cost function of manufacturing overhead (hint: manufacturing overhead has both fixed and variable elements).

4) Calculate the cost of goods sold, costs of goods manufactured, and work-in-progress of Owly Company for this month before the adjustment of over- or under-applied overhead.

5) The actual operating expenses are as follows:

Sales salaries	3,000
Indirect labour	1,600
Production manager's salary	4,000
Marketing costs	6,000
Factory lease	4,000

The company found that the actual fixed manufacturing overhead was $600, and variable overhead was $9,000. The company decided to adjust over- or under-applied manufacturing overhead by adjusting the costs of goods sold. Compute the costs of goods sold after the adjustment and prepare an income statement for this month.

3. Job-Order Costing and Cost Classification Owly Company manufacture customized components. During this month, the company worked on three jobs and recorded the following: Job 1 Job 2 Job 3 Direct materials used 3,200 4,500 6,100 Direct labor 2,100 3,000 4,200 Machine hours used 500 200 300 Direct labor hour 70 100 140 Production volume 1,200 2,300 3,300 Lot Size 1 5 15 Price 20 30 5 Job 1 was completed but not sold, Job 2 was still in progress, and job 3 was completed and sold. Before the beginning of this month, the company estimated the operating expenses. The company also estimated total machine hours, direct labor hours, and total production volume to be 1,100 hours, 300 hours, and 6,500 units, respectively. Sales salaries 3,000 Indirect labor 1,600 Production manager's salary 4,000 Marketing costs 6,000 Factory lease 4,000 The company asked its production supervisor to come up with an allocation method for the manufacturing overhead. The company wants to allocate the fixed proportion of manufacturing overhead equally to their three products. The rest of manufacturing overhead should be allocated by an appropriate allocation base. following a typical job-order costing method. The production supervisor examined the results of past operations to find the allocation base for the manufacturing overhead. She believes that a measure that best explains the changes in manufacturing overhead should be the allocation base. Machine hours 340 140 400 Direct labor hour 300 320 300 20 270 330 240 240 Manufacturing overhead 9,600 10,200 9,600 8,700 7,800 9,600 8,700 7,800 6,900 10,500 12,300 13,200 Required: Production Volume 4,960 60 4,590 1,980 460 2,920 1,420 2,650 3,540 3,320 4,470 1,540 300 350 270 240 210 410 170 330 300 390 390 420 3. Job-Order Costing and Cost Classification Owly Company manufacture customized components. During this month, the company worked on three jobs and recorded the following: Job 1 Job 2 Job 3 Direct materials used 3,200 4,500 6,100 Direct labor 2,100 3,000 4,200 Machine hours used 500 200 300 Direct labor hour 70 100 140 Production volume 1,200 2,300 3,300 Lot Size 1 5 15 Price 20 30 5 Job 1 was completed but not sold, Job 2 was still in progress, and job 3 was completed and sold. Before the beginning of this month, the company estimated the operating expenses. The company also estimated total machine hours, direct labor hours, and total production volume to be 1,100 hours, 300 hours, and 6,500 units, respectively. Sales salaries 3,000 Indirect labor 1,600 Production manager's salary 4,000 Marketing costs 6,000 Factory lease 4,000 The company asked its production supervisor to come up with an allocation method for the manufacturing overhead. The company wants to allocate the fixed proportion of manufacturing overhead equally to their three products. The rest of manufacturing overhead should be allocated by an appropriate allocation base. following a typical job-order costing method. The production supervisor examined the results of past operations to find the allocation base for the manufacturing overhead. She believes that a measure that best explains the changes in manufacturing overhead should be the allocation base. Machine hours 340 140 400 Direct labor hour 300 320 300 20 270 330 240 240 Manufacturing overhead 9,600 10,200 9,600 8,700 7,800 9,600 8,700 7,800 6,900 10,500 12,300 13,200 Required: Production Volume 4,960 60 4,590 1,980 460 2,920 1,420 2,650 3,540 3,320 4,470 1,540 300 350 270 240 210 410 170 330 300 390 390 420