Problem:
Job costing, accounting for manufacturing overhead, budgeted rates. The Lynn Company uses a normal job-costing system at its Minneapolis plant. The plant has a machining department and an assembly department. Its job-costing system has two direct-cost categories (direct materials and direct manufacturing labor) and two manufacturing overhead cost pools (the machining department overhead, allocated to jobs based on actual machine-hours, and the assembly department overhead, allocated to jobs based on actual direct manufacturing labor costs). The 2011 budget for the plant is as follows:
|
Machining Department
|
Assembly Department
|
|
Manufacturing overhead
|
$1,800,000
|
$3,600,000
|
|
Direct manufacturing labor costs
|
$1,400,000
|
$2,000,000
|
|
Direct manufacturing labor-hours
|
100,000
|
200,000
|
|
Machine-hours
|
50,000
|
200,000
|
1. Present an overview diagram of Lynn's job-costing system. Compute the budgeted manufacturing overhead rate for each department.
2. During February, the job-cost record for Job 494 contained the following:
|
Machining Department
|
Assembly Department
|
|
Direct materials used
|
$45,000
|
$70,000
|
|
Direct manufacturing labor costs
|
$14,000
|
$15,000
|
|
Direct manufacturing labor-hours
|
1,000
|
1,500
|
|
Machine-hours
|
2,000
|
1,000
|
Compute the total manufacturing overhead costs allocated to Job 494.
3. At the end of 2011, the actual manufacturing overhead costs were $2,100,000 in machining and $3,700,000 in assembly. Assume that 55,000 actual machine-hours were used in machining and that actual direct manufacturing labor costs in assembly were $2,200,000. Compute the over- or under allocated manufacturing overhead for each department.