Question

Job Costs Using Activity-Based Costing

Heitger Company is a job-order costing firm that uses activity-based costing to apply overhead to jobs. Heitger identified three overhead activities and related drivers. Budgeted information for the year is as follows:

Activity	Cost		Driver	Amount of Driver
Materials handling	$92,400		Number of moves	4,000
Engineering	93,600		Number of change orders	6,000
Other overhead	230,300		Direct labor hours	49,000

Heitger worked on four jobs in July. Data are as follows:

	Job 13-43		Job 13-44		Job 13-45		Job 13-46
Beginning balance	$23,900		$18,200		$2,000		$0
Direct materials	$5,400		$9,100		$10,200		$9,800
Direct labor cost	$880		$1,020		$1,560		$120

	Job 13-43		Job 13-44		Job 13-45		Job 13-46
Number of moves	47		53		31		6
Number of change orders	33		35		21		15
Direct labor hours	880		1,020		1,560		120

By July 31, Jobs 13-43 and 13-44 were completed and sold. Jobs 13-45 and 13-46 were still in process.

. Calculate the activity rates for each of the three overhead activities. Round all activity rates to the nearest cent.

Materials handling rate
Engineering rate
Other overhead rate

2. Calculate the balance in Work in Process on July 31.

3. Calculate the cost of goods sold for July.

4. What if Job 13-46 required no engineering change orders? What is the difference in the new cost of Job 13-46? How would the cost of the other jobs be affected?

Answer 1

Calculate the activity rates for each of the three overhead activities. Round all activity rates to the nearest cent.

Activity	Cost	Amount of Driver	Activity Rate
Materials handling	92,400	4,000	23.10	per move
Engineering	93,600	6,000	15.60	per change order
Other overhead	2,30,300	49,000	4.70	per direct labor hour

2. Calculate the balance in Work in Process on July 31.

	Job 13-43	Job 13-44	Job 13-45	Job 13-46
Beginning balance	23,900	18,200	2,000	0
Direct materials	5,400	9,100	10,200	9,800
Direct labor cost	880	1,020	1,560	120
Material handling @23.10	1,086	1,224	716	139
Engineering @ 15.60	514.8	546	327.6	234
Other overhead @ 4.70	4,136	4,794	7,332	564
Total costs	35,917	34,884	22,136	10,857

Balance in Work in Process on July 31	Cost of Jobs
Job 13-45	22,136
Job 13-46	10,857
balance in Work in Process on July 31	32,992

3. Calculate the cost of goods sold for July.

Cost of goods sold for July
Job 13-43	35,917
Job 13-44	34,884
Cost of goods sold for July	70,801

4. What if Job 13-46 required no engineering change orders? What is the difference in the new cost of Job 13-46? How would the cost of the other jobs be affected?

	Job 13-46
Beginning balance	0
Direct materials	9,800
Direct labor cost	120
Material handling @23.10	139
Other overhead @ 4.70	564
New Total costs	10,623

The cost of the other jobs will get increased