Question
Jasper Company, a machine tooling firm, has several plants. One plant, located in Saint Cloud, Minnesota, uses a job order costing system for its batch
Jasper Company, a machine tooling firm, has several plants. One plant, located in Saint Cloud, Minnesota, uses a job order costing system for its batch production processes. The Saint Cloud plant has two departments through which most jobs pass. Plantwide overhead, which includes the plant managers salary, accounting personnel, cafeteria, and human resources, is budgeted at $200,000. During the past year, actual plantwide overhead was $185,000. Each departments overhead consists primarily of depreciation and other machine-related expenses. Selected budgeted and actual data from the Saint Cloud plant for the past year are as follows:
Department A | Department B | |
---|---|---|
Budgeted department overhead (excludes plantwide overhead) | $ 196,000 | $ 559,000 |
Actual department overhead | 142,000 | 574,000 |
Expected total activity: | ||
Direct labor hours | 36,000 | 10,000 |
Machine-hours | 14,000 | 43,000 |
Actual activity: | ||
Direct labor hours | 38,500 | 9,400 |
Machine-hours | 14,500 | 45,000 |
For the coming year, the accountants at the Saint Cloud plant are in the process of helping the salesforce create bids for several jobs. Projected data pertaining only to job number 110 are as follows:
Direct materials | $ 16,500 |
---|---|
Direct labor cost: | |
Department A (2,000 hours) | 30,000 |
Department B (500 hours) | 10,000 |
Machine-hours projected: | |
Department A | 140 |
Department B | 1,200 |
Units produced | 10,000 |
a-1. Assume the Saint Cloud plant uses a single plantwide overhead rate to assign all overhead (plantwide and department) costs to jobs. Use expected total direct labor hours to compute the overhead rate.
a-2. What is the expected cost per unit produced for job number 110?
b-1. Find the plant wide overhead rate by using expected machine hours.
b-2. Find the department overhead rate using expected machine hours for Department A and Department B.
b-3. Calculate the projected manufacturing costs per unit for job 110 using the three separate rates computed.
c-1. The sales policy at the Saint Cloud plant dictates that job bids be calculated by adding 24 percent to total manufacturing costs. What would be the bid for job number 110 using an overhead rate of $20.76 per unit?
c-2. The sales policy at the Saint Cloud plant dictates that job bids be calculated by adding 24 percent to total manufacturing costs. What would be the bid for job number 110 using the following three separate overhead rates based on machine hours?
Plantwide rate of $3.51 per machine hour
Department A overhead rate of $14.00 per machine hour
Department B overhead rate of $13.00 per machine hour
c-3. Which of the overhead allocation methods would you recommend?
d. Compute the under- or overapplied overhead for the Saint Cloud plant for the year assuming the Saint Cloud plant uses three separate overhead rates to assign overhead costs to jobs based on machine hours.
f. A Saint Cloud subcontractor has offered to produce the parts for job number 110 for a price of $8.5 per unit. Assume the Saint Cloud sales force has already committed to the bid price of $78,763.40. Compute incremental cost (benefit) to make if the Saint Cloud plant could use the facilities necessary to produce parts for job number 110 for another job that could earn an incremental profit of $17,000? Assume the Saint Cloud plant uses three separate overhead rates to assign overhead costs to jobs based on machine hours.
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