Answer:
Heitger Company
1. Calculation of the activity rates for each of the three overhead activities:
Activity Cost Driver Amount Activity
of Driver Rate
Materials handling $60,500 Number of moves 2,500 $24.20
Engineering 116,900 Number of change orders 7,000 $16.70
Other overhead 266,800 Direct labor hours 46,000 $5.80
Activity rate = Activity Cost/Amount of Driver
2. Job-order cost sheets through July 31:
Job 13-43 Job 13-44 Job 13-45 Job 13-46
Beginning balance $22,800 $20,000 $2,900 $0
Direct materials $5,300 $10,000 $11,700 $10,500
Direct labor cost $930 $960 $1,670 $140
Manufacturing overhead $6,413.70 $7,585.40 $10,579.2 $1,242.8
Production costs $35,443.70 $38,545.40 $26,849.20 $11,882.80
3. Balance in Work in Process:
Job 13-45 Job 13-46
Beginning balance $2,900 $0
Direct materials $11,700 $10,500
Direct labor cost $1,670 $140
Manufacturing overhead $10,579.2 $1,242.8
Production costs $26,849.20 $11,882.80
Total balance in Work in Process = $38,732.00
4. Cost of Goods Sold for July:
Job 13-43 Job 13-44
Beginning balance $22,800 $20,000
Direct materials $5,300 $10,000
Direct labor cost $930 $960
Manufacturing overhead $6,413.70 $7,585.40
Production costs $35,443.70 $38,545.40
Total cost of goods sold = $73,989.10
5. Engineering overhead cost of $267.20 will be deducted from the total production cost to date of Job 13-46 ($11,882.80 - 267.20) to arrive a new production cost to date of $11,615.60.
There is no obvious effect on other jobs, until more information is provided as to the budgeted change orders and engineering cost for Job 13-46. That is when the activity rate may change.
Explanation:
a) Data and Calculations:
Job-order costing
Uses activity-based costing to apply overhead to jobs
Three overhead activities and related drivers.
Budgeted information for the year:
Activity Cost Driver Amount Activity
of Driver Rate
Materials handling $60,500 Number of moves 2,500 $24.20
Engineering 116,900 Number of change orders 7,000 $16.70
Other overhead 266,800 Direct labor hours 46,000 $5.80
Data for Jobs worked in July:
Job 13-43 Job 13-44 Job 13-45 Job 13-46
Beginning balance $22,800 $20,000 $2,900 $0
Direct materials $5,300 $10,000 $11,700 $10,500
Direct labor cost $930 $960 $1,670 $140
Manufacturing overhead $6,413.70 $7,585.40 $10,579.2 $1,242.8
Production costs $35,443.70 $38,545.40 $26,849.20 $11,882.80
Number of moves 40 53 30 4
Number of change orders 31 44 16 20
Direct labor hours 930 960 1,670 140
Allocation of overheads Job 13-43 Job 13-44 Job 13-45 Job 13-46
Number of moves $24.20 $968 $1,282.60 $726.00 $96.80
Number of change orders 16.70 517.70 734.80 267.20 334.00
Direct labor hours 5.80 5,394.00 5,568 9,686 812.00
Total overhead allocated $6,413.70 $7,585.40 $10,579.2 $1,242.8
