Question
Richard and Maria were not only best friends, they were coworkers-coworkers who were very passionate about their jobs and their company! The Job Shop,
Richard and Maria were not only best friends, they were coworkers-coworkers who were very passionate about their jobs and their company! The Job Shop, the clever name of the company where they work, produces and sells several different styles of reading glasses. Today, on The Job Shop floor, Richard and Maria are discussing the styles of readers that are currently in production. Richard: You see this job over here, Maria? This job (#AA110) was started last month, but now it's finally ready to ship. I heard that most of the order is already sold, in fact. Maria: Really? I heard something similar about the job on the other side of the plant (#AA111). That is, I heard most of it is already sold, too. But, because that job just started at the beginning of this month, I bet it'll be more profitable because it didn't have to sit in processing as long. Richard: Maria, I don't think that's how this works. Remember our manager telling us that we need to keep our machine hours down to a minimum? The reason is because we use machine hours to budget and apply our MOH costs to our products. If the job is just sitting there, waiting for the next processing step to be completed, it is not using machine hours, so more MOH costs shouldn't be applied because hours are not being used. Richard is correct in that only one job (#AA110) is still in process on January 1, 2025. The job cost sheet for Job #AA110 shows that $6,100 of direct material had been used on the job in 2024. Direct labor used on the job in 2024 was $1,750, and MOH applied to the job in 2024 was $4,150. Maria is also correct as Job #AA111 was started in January. But two other jobs were freshly started in January, too: #AA112, #AA113. Material cost, labor cost, and machine hour usage for January is as follows. Job # Direct Materials Requisitioned Direct Labor Cost Incurred Machine Hours Worked AA110 $1,520 $1,000 80 AA111 7,400 2,170 260 AA112 5,600 1,600 150 AA113 3,800 1,200 110 During 2025, The Job Shop expects to incur $318,600 of MOH and expects to work 11,800 machine hours. MOH cost incurred during January is as follows. $14,300 of depreciation on plant and equipment. . $850 of insurance on the plant. $3,800 of utilities. $4,400 of indirect labor.
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