Question
Question 7: Computing Costs of an Object Donkey Aussie Limited has two departments Iron and Jelly. The company uses a job-order costing system. The company
Question 7: Computing Costs of an Object
Donkey Aussie Limited has two departments Iron and Jelly. The company uses a job-order costing system. The company manufactures luxury bicycles for sport.
The company currently computes a predetermined overhead rate for the overall plantwide based on machine-hours.
The company is considering a change to compute predetermined overhead per each department. The Iron Department would base its rate on machine-hours and the Jelly Department bases its rate on direct labour-hours. At the beginning of the year, the company made the following estimates:
| Department | |
| Iron | Jelly |
Direct labour-hours | 14,000 | 420,000 |
Machine-hours | 640,000 | 26,000 |
Total fixed manufacturing overhead cost | $11,390,000 | $11,500,000 |
Variable manufacturing overhead per machine-hour | $14.00 | $14.00 |
Variable manufacturing overhead per direct labour-hour | $26.75 | $26.75 |
During the company complete Job #7707, which was started and completed during the year. The job sheet for Job #7707 is presented as follows:
| Department | |
| Iron | Jelly |
Direct labour-hours | 16 | 299 |
Machine-hours | 410 | 21 |
Materials requisitioned | $312,800 | $216,370 |
Direct labour costs | $85,145 | $106,160 |
Required:
- Compute the cost of Job #7707 if pre-determined overhead is calculated based on a plantwide basis.
- Compute the cost of Job #7707 if pre-determined overhead is calculated based on a department basis.
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