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Dillon Products manufactures various machined parts to customer specifications. The company uses a job-order costing system and applies overhead cost to jobs on the
Dillon Products manufactures various machined parts to customer specifications. The company uses a job-order costing system and applies overhead cost to jobs on the basis of machine-hours. At the beginning of the year, the company used a cost formula to estimate that it would incur $4,237,500 in manufacturing overhead cost at an activity level of 565,000 machine-hours. The company spent the entire month of January working on a large order for 12,200 custom-made machined parts. The company had no work in process at the beginning of January. Cost data relating to January follow: a. Raw materials purchased on account, $321,000. b. Raw materials used in production, $263,000 (80% direct materials and 20% Indirect materials). c. Labor cost accrued in the factory, $159,000 (one-third direct labor and two-thirds indirect labor), d. Depreciation recorded on factory equipment, $62,800. e. Other manufacturing overhead costs incurred on account, $84,300. 1. Manufacturing overhead cost was applied to production on the basis of 40,590 machine-hours actually worked during the month. g. The completed job for 12.200 custom-made machined parts was moved into the finished goods warehouse on January 31 to await delivery to the customer. (In computing the dollar amount for this entry, remember that the cost of a completed job consists of direct materials, direct labor, and applied overhead.)
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