Question
Benedict Chemicals produces a range of chemical products for industries on getting bulk orders. It uses a job costing system to calculate the cost of
Benedict Chemicals produces a range of chemical products for industries on getting bulk orders. It uses a job costing system to calculate the cost of a particular job. Materials & labour used in the manufacturing process are traced, but manufacturing overhead to different jobs using direct manufacturing labour costs. Benedict provides the following information.
Budget 2022 | Actual 2022 | |
Direct material costs | $2,750,000 | $3,000,000 |
Direct manufacturing labour costs | 1,830,000 | 2,250,000 |
Manufacturing overhead costs | 3,294,000 | 3,780,000 |
Required:
a. Compute the actual & budgeted manufacturing overhead rates for 2022.
b. During May, the job-cost records for Job 365 contained the following:
Direct materials used $73,500
Direct manufacturing labour costs $51,000
Compute cost of Job 365 using i) actual costing ii) normal costing
a. At the end of 2022, compute the under- or over allocated manufacturing overhead under normal costing. Why is there no under- or ever allocated overhead under actual costing?
b. Why might managers at Benedict Chemicals prefer to use normal costing?
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