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	$121,000		Number of moves	5,000
Engineering	125,250		Number of change orders	7,500
Other overhead	272,600		Direct labor hours	47,000

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	$23,000		$18,900		$2,400		$0
Direct materials	$6,400		$9,450		$11,600		$8,800
Direct labor cost	$1,000		$990		$1,690		$130

	Job 13-43		Job 13-44		Job 13-45		Job 13-46
Number of moves	44		46		31		5
Number of change orders	27		39		23		21
Direct labor hours	1,000		990		1,690		130

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

Required:

1. Prepare job-order cost sheets for each job showing all costs through July 31.

When required, round your answers to the nearest dollar. If an amount is zero, enter "0".

Heitger Company
Job-Order Cost Sheets
	Job 13-43	Job 13-44	Job 13-45	Job 13-46
Balance, July 1	$	$	$	$
Direct materials
Direct labor cost
Materials handling
Engineering
Other overhead
Total	$	$	$	$

2. Calculate the cost of goods sold for July.
$______

3. 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

Computation of Cost per driver Activity Material Handling Engineering Other Overheads Amount of Cost per Cost (a) Driver Driver (b) driver (a/b) $ 1,21,000 Number of moves 5,000 $ 24.20 $ 1,25,250 No of Change orders 7,500 $ 16.70 $ 2,72,600 Direct labours hours 47,000 $ 5.80 Allocation of Overheads on Jobs Activity Cost per Driver Job 13-43 Job 13-44 Job 13-45 Job 13-46 Material Handling $ 24.20 44 x $24.20 46 x $24.20 31 x $24.20 5x $24.20 = $ 1,065 $ 1,113 $ 750 $ 121 Engineering 16.70 27 x $16.70 39 x $16.70 23 x $16.70 21 x $16.70 $ 451 $ 651 $ 384 $ 351 Other Overheads $ 5.80 1000 x $5.80 990 x $5.80 1690 x $5.80 130 x $5.80 $ 5,800 $ 5,742 $ 9,802 $ 754 $ Solution 1: Heitger Company Job-Order Cost Sheets Job 13-43 Job 13-44 Job 13-45 Job 13-46 23,000 $ 18,900 $ 2,400 $ 6,400 $ 9,450 $ 11,600 $ 8,800 1,000 990 $ 1,690$ 1,065 $ 1,113 $ 750 $ 121 451 $ 651 $ 384 $ 351 5,800 $ 5,742 $ 9,802 $ 754 37,716 $ 36,847 $ 26,626 $ 10,156 Balance, July 1 Direcr Materials Direct Labour cost Material Handling Engineering Other Overheads Total 130 $ Solution 2: As Job13-43 and Job 13-44 are completeda and sold, the Cost of Goods sold will be ($37,716 +$36,847) = $ 74,562 Solution 3: If Job 13-46 does not require Engineering change orders, its new cost will be ($10,156 - $351) = $ 9,805 Cost of other jobs will increase as allocation of engineering hours will be changed

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