(2030 min) Job costing, accounting for manufacturing overhead, ...

[humphriesbr@me.com]

(2030 min) Job costing, accounting for manufacturing overhead, budgeted rates.
 
  The Pisano Company uses a job-costing system at its Dover, Delaware, plant. The plant has a machining department and a finishing department. Pisano uses normal costing with two direct-cost categories (direct materials and direct manufacturing labor) and two manufacturing overhead cost pools (the machining department with machine- hours as the allocation base and the finishing department with direct manufacturing labor costs as the allocation base). The 2014 budget for the plant is as follows:
 
   Machining Department Finishing Department
  Manufacturing overhead costs 9,065,000 8,181,000
  Direct manufacturing labor costs  970,000 4,050,000
  Direct manufacturing labor-hours 36,000 155,000
  Machine-hours 185,000 37,000
 
  Required:
  1. Prepare an overview diagram of Pisano's job-costing system.
  2. What is the budgeted manufacturing overhead rate in the machining department? In the finishing department?
  3. During the month of January, the job-cost record for Job 431 shows the following:
 
   Machining Department Finishing Department
  Direct materials used 13,000  5,000
  Direct manufacturing labor costs  900  1,250
  Direct manufacturing labor-hours 20 70
  Machine-hours 140 20
 
  Compute the total manufacturing overhead cost allocated to Job 431.
  4. Assuming that Job 431 consisted of 300 units of product, what is the cost per unit?
  5. Amounts at the end of 2014 are as follows:
 
   Machining Department Finishing Department
  Manufacturing overhead incurred 10,000,000 7,982,000
  Direct manufacturing labor costs  1,030,000 4,100,000
  Machine-hours 200,000 34,000
 
  Compute the under- or overallocated manufacturing overhead for each department and for the Dover plant as a whole.
  6. Why might Pisano use two different manufacturing overhead cost pools in its job-costing system?

Question 2

The purpose of the AICPA's Code of Professional Conduct is to
 
  A) induce the accountants through guidance, rules, interpretations, and rulings to join the AICPA.
  B) help AICPA members monitor their own behavior.
  C) employ the degree of knowledge, skill, and judgment possessed by a rational individual.
  D) fulfil all the client requirements included in the engagement agreement.

[cat123]

Answer to Question 1

1. An overview of the job-costing system is:

2. Budgeted manufacturing overhead divided by allocation base:

a. Machining Department:

= 49 per machine-hour

b. Finishing Department:

= 202 of direct manufacturing labor costs

3. Machining Department overhead, 49  140 machine-hours 6,860
Finishing Department overhead, 202 of 1,250 2,525
Total manufacturing overhead allocated 9,385

4. Total costs of Job 431:
Direct costs:
Direct materialsMachining Department 13,000
Finishing Department 5,000
Direct manufacturing labor Machining Department 900
Finishing Department 1,250 20,150
Indirect costs:
Machining Department overhead, 49  140  6,860
Finishing Department overhead, 202 of 1,250 2,525 9,385
Total costs 29,535

The per-unit product cost of Job 431 is 29,535  300 units = 98.45 per unit
The point of this part is (a) to get the definitions straight and (b) to underscore that overhead is allocated by multiplying the actual amount of the allocation base by the budgeted rate.
5.
Machining Finishing
Manufacturing overhead incurred (actual) 10,000,000 7,982,000
Manufacturing overhead allocated
200,000 hours  49 9,800,000
202 of 4,100,000 8,282,000
Underallocated manufacturing overhead  200,000
Overallocated manufacturing overhead  300,000
Total overallocated overhead = 300,000  200,000 = 100,000
6. A homogeneous cost pool is one where all costs have the same or a similar cause-and-effect or benefits-received relationship with the cost-allocation base. Pisano likely assumes that all its manufacturing overhead cost items are not homogeneous. Specifically, those in the Machining Department have a cause-and-effect relationship with machine-hours, while those in the Finishing Department have a cause-and-effect relationship with direct manufacturing labor costs. Pisano believes that the benefits of using two cost pools (more accurate product costs and better ability to manage costs) exceed the costs of implementing a more complex system.

Answer to Question 2

B
Explanation: B) The purpose of the AICPA's Code of Professional Conduct is to help AICPA members monitor their own behavior.

[humphriesbr@me.com]

Excellent

[bbburns21]

Thanks for the timely response, appreciate it