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Jess Creations (JC) manufactures dresses. It uses normal costing and a plant wide MOH rate based on direct labour hours. JC has two operating departments:
Jess Creations ("JC") manufactures dresses. It uses normal costing and a plant wide MOH rate based on direct labour hours. JC has two operating departments: A and B. The manufacturing activities are divided into cutting, sewing, maintenance (including utilities) and material handling (which is automated and occur only in Department A). Material for dresses are cut by machines in Department A. Next, in Department B, the labour intensive jobs of sewing and packing are performed by workers using individual sewing machines. Recently, the CFO is considering using activity-based costing (ABC) to allocate MOH. The accountant has provided the following annual budgeted activities data: Overhead Cost Budgeted Cost Budgeted Pool Cost Driver ($) Activity Cutting 167,040 |Machine hours 55.680 Sewing 230,580 DLH 54.000 Maintenance 111,360 Machine hours 55.680 Material handling 73,500 Set up 245 (each setup can produce 1,000 units) The following data relates to the current job completed for EFG Lid, a regular customer. Department A Department B Direct materials $120.000 Direct labour rate $8 per DLH Number of units completed 60,000 Direct labour hours per unit 0.1 0.5 Machine hours per unit 0.5 0.3 Number of setups 60 The company's budgeted direct labour hours for the year is 145,620 direct labour hour (DLH). JC prices its products based normal full product cost plus 5% mark up
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