The Job Cost Record for Job #624

624 revealed that direct materials requisitioned for the job totaled $ 1 comma 160

$1,160. The Job Cost Record also showed that direct labor for this job totaled 12

12 hours at a wage rate of $ 20

$20 per hour. Other data collected on the resources used by Job #624

624 included:

(data table)

4

machine setups required

4

machine hours

2

polishing cloths

3

quality control tests run

__________

Hooper

Hooper Products has adopted an ABC costing system. The following manufacturingactivities, indirect manufacturingcosts, and cost drivers have beenidentified

Total estimated

MOH costs related

Total estimated amount of

Activity

to activity

allocation base activity

Machine setup

. . . . . . . . . . . . . . . . . . . . . . .

$

117,000

1,800 setups

Machining

. . . . . . . . . . . . . . . . . . . . . . . . . .

$

1,320,000

8,000 machine hours

Polishing

. . . . . . . . . . . . . . . . . . . . . . . . . . .

$

40,000

8,000 polishing cloths

Quality control

. . . . . . . . . . . . . . . . . . . . . . .

$

75,000

1,000 tests run

Facility-level costs

. . . . . . . . . . . . . . . . .

$

165,000

55,000 DL hours

Total manufacturing overhead (MOH)

. . . .

$

1,717,000

___________________________________________________________________________________________________________________

Machine setup

/

=

per setup

Machining

/

=

per MH

Polishing

/

=

per cloth

Quality control

/

=

per test

Facility level costs

/

=

per DL hour

Requirement 2. Calculate the total cost of Job #624

624 (use an ABC costingsystem).

Job Cost Record

Manufacturing

JOB # 624

Costs

Total job cost

Requirement 3. Why would ABC provide a more accurate allocation of manufacturing overhead(MOH) than a plantwiderate?

The cost estimate based on ABC would provide a more accurate allocation of MOH than a plantwide rate because this cost estimate takes into account

the direct labor hours used by each job

the machine hours used by each job

the specific resources used by each job

. This information can be used to

determine competitive direct labor rates

price jobs based on more accurate costs

schedule production

.

Requirement 4. Assume that Hooper

Hooper Products used a traditional costing system rather than an ABC system. Its plantwide MOH rate would have been determined using direct labor(DL) hours as the allocation base. How much cost distortion would have occurred on thisjob?

Begin by calculating the plantwide overhead rate. First identify the formula used to compute the plantwide overheadrate, then compute the rate.(Round the rate to the nearest wholedollar.)

/

=

Plantwide overhead rate

/

=

How much cost distortion would have occurred on thisjob? (Use parentheses or a minus sign forunder-costed amounts.)

Job #624

Plantwide overhead allocated

Less: ABC

Cost distortion difference