Question

The Toy Compay uses a job-costing system at its Chicago plant. The plant has a machining department and a finishing department. Toy uses normal costing with two direct-cost Categories (direct materials and direct manufacturing labor) and two manufacturing overhead cost pools (the machining department with direct material costs as the allotion hase and finishing department with direct costs as the allocation base.) The 2020 budget for the plant is as follows Cell referencing answers is required. Machining department Finishing department Manufacturing overhead cost 9.000.000 4.000.000 Direct materal 140.000 4.000.000 Direet manufacturing labor cost 970.000 4.000.000 Direct manufacturing labor hour 26,000 160,000 Machin hours 31,000 What is the budgeted marxafacturing overhead rate in the respective depatments Machining department Finishidapurtment During the month of February, the job-cost record for Job 500 shows the following: Machining department Direct materials used 21.150 Direct laborused 350 Direct labor hours 30 Machine hours 150 Finishing department 5.000 1.300 SO 20 Units produced 500 Prepare the respective journal entries to match cost flows to product flows De Credit Direct material Machining department Finishing department Direct labor Machining department Finishing department Manufacturing overhead Machining department WIP-Job 500-MFO Manufacturing overhead applied Finishing department WIP-Job 500-MFO Manufacturing overhead applied What is the total product cost for this job? What is the cost per unit? Explain this total cost to a collcage.

Try opening the pictures in a different tab and zooming in on the numbers

1)What is the budgeted manufacturing overhead rate in the respective departments?

2)Prepare the respective journal entries to match cost flow to product flow? (Direct Material Journal entries, Direct Labor Journal Entries, and Manufacturing Overhead Journal entries to match cost flows to product flows)

3) What is the total product cost for this job? What is the cost per unit? Explain total cost to a colleague

Answer 1

1)

Budgeted manufacturing overhead rate

For Machining Department

= (Budgeted Manufacturing overhead/Anticipated Direct Material Cost)*100

=(9,000,000/140,000)*100

=6,428.57% 0r 64.2857

For Finishing Department

= (Budgeted Manufacturing overhead/Anticipated Direct Costs)*100

=(4,000,000/8,000,000)*100

=50% or 0.50

Direct Costs = 4,000,000 + 4,000,000 = 8,000,000

2)

Journal Entries:

Direct Material

Machining Department

Dr. Work in Process (Job 500) - Machining Department 21,150

Cr. Direct Material 21,150

Finishing Department

Dr. Work in Process (Job 500) - Finishing Department 5,000

Cr. Direct Material 5,000

Direct Labour

Machining Department

Dr. Work in Process (Job 500) - Machining Department 350

Cr. Direct Labor 350

Finishing Department

Dr. Work in Process (Job 500) - Finishing Department 1,300

Cr. Direct Labor 1,300

Manufacturing Overhead

Machining Department

WIP - Job 500 - MFO

Manufacturing Overhed Applied

= Direct Material * Manufacturing Overhead Rate

= 21,150*6428.57%

= 1,359,643

Journal Entry:

Dr. Work in Process (Job 500) - Machining Department 1,359,643

Cr. Manufacturing Overhead 1,359,643

Finishing Department

WIP - Job 500 - MFO

Manufacturing Overhead Applied

= Direct Costs * Manufacturing Overhead Rate

=( 5,000+1,300)*0.50

= 3,150

Journal Entry:

Dr. Work in Process (Job 500) - Finishing Department 3,150

Cr. Manufacturing Overhead    3,150

For transferring costs to finishing department:

Dr. Work in Process (Job 500) - Finishing Department 1,381,143

Cr. Work in Process (Job 500) - Machining Department 1,381,143

On Job Completion:

Dr. Job 500 1,390,593

Cr. Work in Process (Job 500) - Finishing Department 1,390,593

3)

Total Product Cost for this Job = 1,390,593

(21,150 + 350 + 5,000 + 1,300 + 1,359,643 + 3,150)

Unit Cost = 1,390,593/500

= 2,781

Total cost include all the costs incurred upt to manufacturing stage. These include raw materials, labor costs and other indirect costs incurred in the processes to bring the product into a finished or completion stage. Other indirect costs include depreciation, indirect labor, maintenance of plant and machinery, energy costsetc.