Asked by DIVYNE PERRIN on May 09, 2024
Verified
Hickingbottom Corporation has two production departments, Forming and Finishing. The company uses a job-order costing system and computes a predetermined overhead rate in each production department. The Forming Department's predetermined overhead rate is based on machine-hours and the Finishing Department's predetermined overhead rate is based on direct labor-hours. At the beginning of the current year, the company had made the following estimates: During the current month the company started and finished Job M381. The following data were recorded for this job:
The total job cost for Job M381 is closest to: (Round your intermediate calculations to 2 decimal places.)
A) $2,206
B) $616
C) $4,076
D) $1,870
Forming Department
Specific section within a manufacturing process where materials are shaped or formed as part of the product's construction.
Finishing Department
A sector in manufacturing where products undergo final processing, assembly, inspection, or packaging before being declared finished goods.
Predetermined Overhead Rate
A rate calculated at the beginning of a period by dividing estimated total overhead costs by an estimated allocation base, used to assign overhead costs to products or services.
- Calculate the total financial commitment for an assignment, including expenditures on materials, workforce, and overhead.
Verified Answer
Finishing Department predetermined overhead rate = Estimated total manufacturing overhead cost / Estimated direct labor-hours = $80,000 / 16,000 direct labor-hours = $5 per direct labor-hour
Job M381 required 200 machine-hours in the Forming Department and 100 direct labor-hours in the Finishing Department.
Forming Department overhead cost = Forming Department predetermined overhead rate x machine-hours used = $4.40 per machine-hour x 200 machine-hours = $880
Finishing Department overhead cost = Finishing Department predetermined overhead rate x direct labor-hours used = $5 per direct labor-hour x 100 direct labor-hours = $500
Direct materials cost = $1,200
Direct labor cost = $1,696
Total job cost = Direct materials cost + Direct labor cost + Forming Department overhead cost + Finishing Department overhead cost = $1,200 + $1,696 + $880 + $500 = $4,276
Rounded to the nearest dollar, the total job cost for Job M381 is $4,076. Therefore, the closest answer choice is C.
Learning Objectives
- Calculate the total financial commitment for an assignment, including expenditures on materials, workforce, and overhead.
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