Question

Pigot Corporation uses job costing and has two production departments, M and A. Budgeted manufacturing costs for the year are as follows: Dept. MDept. A Direct materials$718,000 $118,000 Direct labor 218,000 836,000 Factory overhead 654,000 418,000 The actual direct materials and direct labor costs charged to Job. No. 432 during the year were as follows: Direct materials $58,000 Direct labor: Department M$26,000 Department A 30,000 56,000 Pigot applies manufacturing overhead to production orders on the basis of direct labor cost using departmental rates predetermined at the beginning of the year based on the annual budget. The total cost associated with Job. No. 432 for the year should be:

Answer 1

Answer:

Total cost= $207,000

Explanation:

Giving the following information:

Budgeted manufacturing costs Dept. M Dept. A:

Direct labor 218,000 836,000

Factory overhead 654,000 418,000

Job. No. 432:

Direct materials $58,000

Direct labor: Department M$26,000 Department A 30,000

First, we need to determine the predetermined overhead rate for each department:

Predetermined manufacturing overhead rate= total estimated overhead costs for the period/ total amount of allocation base

Departement M= 654,000/218,000= $3 per direct labor dollar

Department A= 418,000/836,000= $0.5 per direct labor dollar

Now, we can calculate the total cost:

Total cost= direct material + direct labor + allocated overhead:

Total cost= 58,000 + 56,000 + (3*26,000 + 0.5*30,000)

Total cost= $207,000