Chapter 11 Exercises

Step-by-Step Exercises

First, calculate a predetermined overhead rate for each pool of overhead.

Question 1

Tembe, Inc. uses a job costing system with a single pool of overhead budgeted to be $5,568,000 for the upcoming period and allocated on the basis of direct labor hours. Tembe plans to manufacture 3,000 units of Type A, which uses 40 direct labor hours per unit; 5,000 units of Type B, which uses 200 direct labor hours per unit; and 10,000 units of Type C, which uses 120 direct labor hours per unit.

Calculate the predetermined overhead rate.

Question 2

Abka Company manufactures two basic kinds of products using an activity-based costing system with manufacturing overhead divided into five activity pools as follows:

Cost allocation base usage is as follows:

Calculate the predetermined overhead rate for each pool of overhead.

Question 3

Toroso Manufacturing uses a job costing system with manufacturing overhead calculated and allocated separately within each department. The Mixing department allocates overhead based on Mixing department direct labor hours. The Baking department allocates overhead on the basis of oven hours. The Packaging department allocates overhead on the basis of Packaging department direct labor hours. Budgeted cost and cost allocation bases are as follows:

Calculate the predetermined overhead rate for each pool of overhead.

Next, calculate the cost of the job.

Question 4

Gemini Production uses a job costing system with two overhead pools: Overhead A, allocated at a rate of $45 per direct labor hour; and Overhead B, allocated at a rate of $100 per machine hour. Gemini just completed Job A45, which used $500,000 in direct materials costs, $80,000 in direct labor costs for 8,000 hours, and 2,500 machine hours.

Calculate the cost of Job A45.

Question 5

Rook, Inc. uses a job costing system with a single overhead pool allocated at a rate of $60 per direct labor hour. Rook pays their direct labor $25 per hour. On Job 390, Rook spent $150,000 on direct materials costs, and direct labor worked 1,000 hours.

Calculate the cost of Job 390.

Question 6

Mackenzie Company uses a job costing system with four activity-based overhead pools: Cutting, allocated at $4.50 per cut; Molding, allocated at $25 per machine hour; Assembly, allocated at 30% of direct labor cost; and Packing, allocated at $1,000 per order. A recent order from Rose, Inc. used $10,000 in direct materials, $12,000 in direct labor, 500 cuts, and 800 machine hours.

Calculate the cost of the Rose, Inc. order.

Complete Problems

Question 7

Coleman, Inc. uses a job costing system in which all manufacturing overhead costs (budgeted at $500,000) are allocated on the basis of direct labor costs (budgeted at $625,000). This period, Coleman completed a job for O’Reilly Company that cost $10,000 in direct materials and $15,000 in direct labor.

Find the cost of the O’Reilly Company job.

Question 8

Massie Corp. uses an activity-based costing system that assigns five costs to each job: direct labor, direct materials, overhead A (allocated based on direct labor hours), overhead B (allocated based on machine hours), and overhead C (allocated based on number of batches). This period, Massie budgeted the following:

On Job 4630, direct materials cost $12,000, direct labor cost $15,000 (paid at $15 per hour), and 1,200 machine hours were used to produce 1,000 units in batches of 100 units per batch.

Find the cost of Job 4630.

Question 9

The law firm of HJKW uses a job costing system to account for their client costs. The cost of attorney and paralegal time (Professional Labor) is traced to each client, as are the costs of court fees and paperwork. All other costs (Support) are allocated to clients using Professional Labor cost as a cost allocation base. For November, Professional Labor costs were budgeted to be $99,200 and Support costs were budgeted to be $238,080. During November, the firm served a client whose case required $10,200 in attorney time, $12,000 in paralegal time, $5,000 in court fees, and $700 in paperwork costs.

Find the cost of serving the client.

Question 10

Cambrie, Inc. uses a job costing system that divides manufacturing overhead into three categories: design (25% of overhead), production (60% of overhead), and labor support (15% of overhead). Design overhead is allocated on the basis of design hours, production overhead is allocated on the basis of machine hours, and labor support overhead is allocated on the basis of direct labor hours. Budgeted manufacturing overhead cost is $2,000,000, and 2,000 design hours, 500,000 machine hours, and 10,000 direct labor hours were budgeted. During the period, Job 46C was completed, which used $50,000 in direct materials, $80,000 in direct labor, 100 design hours, 7,000 machine hours, and 1,000 direct labor hours.

Find the cost of Job 46C.

Question 11

Gelsey, Inc., which allocates all manufacturing overhead based on direct labor cost, budgeted the following for the first quarter:

Description	Amount	Total
Revenues		1,200,000
Variable costs
Direct materials	100,000
Indirect materials	20,000
Direct labor	250,000
Other variable manufacturing overhead	80,000
Sales commissions	120,000	585,000
Fixed costs
Fixed manufacturing overhead	200,000
Fixed selling and administrative costs	170,000	370,000
Income		Single Line245,000Double Line

Job 418 used $20,000 in direct materials and $60,000 in direct labor.

Find the cost of Job 418.

Question 12

Cambria Company estimated it would have $400,000 in manufacturing overhead costs this period, which it allocates to jobs on the basis of direct labor hours, which were estimated to be 5,000 hours this period. Cambria spends $15.00 per hour on direct labor and $100.00 per unit on direct materials. During the period, Job 4100 (for 300 units) required 150 direct labor hours.

Calculate the cost of Job 4100.

Assignment Problem

Note: Check figures are not provided for assignment problems so your instructor may use them for homework.

Question 13

Janavee Construction applies all overhead to jobs on the basis of direct labor hours. This period, manufacturing overhead is budgeted to be $1,800,000, and direct labor hours are budgeted to be 90,000. Janavee pays direct labor $12 per hour.

Janavee bid on a job that they estimated would require $200,000 in direct materials and 10,000 direct labor hours. Janavee’s bidding policy is to add 50% to the estimated manufacturing cost of a job to cover operating expenses and produce a profit.

Janavee won the bid and completed the job. The total actual cost came in at 105% of projected cost.

1. How much did Janavee bid on the job?
2. What was the actual cost of the job?

Challenge Problem

Question 14

Juniper Corporation uses an activity-based costing system to account for their four types of products. The costing system divides manufacturing overhead into five activity pools, each with its own cost allocation base. The budget for fourth quarter was as follows:

Product	Product A	Product B	Product C	Product D
Production	4,000 units	3,000 units	5,000 units	2,500 units
Direct materials cost	$100 per unit	$150 per unit	$75 per unit	$200 per unit
Direct labor cost	$50 per unit	$200 per unit	$90 per unit	$125 per unit
Design hours	400	200	100	500
Parts	2 per unit	5 per unit	6 per unit	3 per unit
Welds	1 per unit	4 per unit	5 per unit	2 per unit
Machine hours	10 per unit	20 per unit	15 per unit	12 per unit
Packing hours	0.5 per unit	0.25 per unit	0.5 per unit	1 per unit

During the quarter, Juniper filled an order for Larch, Inc., calling for 200 units of Product A, 40 units of Product B, 70 units of Product C, and 150 units of Product D.

1. What is the budgeted cost per unit for each type of product?
2. Assuming that the Larch job came in on budget, what is its cost?

Pre-Assessment Problem

Use this problem to check whether you are fully prepared for the assessment. Work the problem under assessment conditions – don’t use any notes or other materials!

Question 15

Spoodle Company manufactures goods in two processes: Assembly and Finishing. Manufacturing overhead for the period was estimated to be $100,000 for the Assembly process and $75,000 for the Finishing process. Assembly overhead is allocated based on Assembly department machine hours, which were estimated to be 5,000 for the period. Finishing overhead is allocated based on Finishing department direct labor hours, which were estimated to be 2,500 for the period. During the period, Spoodle completed Job 52, which used 50 direct labor hours (10 in the Assembly department and 40 in the Finishing department, paid at $15 per hour), 140 machine hours (100 in the Assembly department and 40 in the Finishing department), and $700 worth of direct materials.

Calculate the cost of Job 52.