Question
Fortis Manufacturing is a custom engine manufacturer that uses a Normal job costing system. It has decided to use machine-hours as the single indirect-cost rate
Fortis Manufacturing is a custom engine manufacturer that uses a Normal job costing system. It has decided to use machine-hours as the single indirect-cost rate to allocate manufacturing overhead costs to the various jobs contracted during the year. The following information is provided:
| Annual | Actual | ||
| Budget | Job #500 | ||
| Direct materials | $ 320,000 | $ 1,800 | |
| Direct manufacturing labour | $ 120,000 | $ 650 | |
| Manufacturing overhead (MOH) | $ 600,000 | ||
| Machine hours | 200,000 | 450 | |
| Labour hours | 6,000 | 33 |
Required (show all calculations):
a. Determine the total manufacturing costs for Job #500. (4 marks)
b. Briefly explain why companies use Normal costing systems instead of Actual costing systems. (2 marks)
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Managerial Accounting
Authors: Stacey Whitecotton, Robert Libby, Fred Phillips
2nd edition
9780077493677, 78025516, 77493672, 9780077826482, 978-0078025518
