Question

Bob’s Electronics Inc. manufactures high-tech screens for computers. In June, the two production departments had budgeted allocation bases of 13,200 machine hours in Department 1 and 7,300 direct manufacturing labour hours in Department 2. The budgeted manufacturing overheads for the month were $56,760 and $41,610, respectively. For Job 101, the actual costs incurred in the two departments were as follows:

	Department 1	Department 2
Direct materials purchased on account	$66,000	$106,500
Direct materials used	12,500	9,100
Direct manufacturing labour	32,500	32,200
Indirect manufacturing labour	6,600	5,400
Indirect materials used	4,500	2,850
Lease on equipment	9,750	2,250
Utilities	600	750

Job 101 incurred 1,720 machine hours in Department 1 and 930 manufacturing labour hours in Department 2. The company uses a budgeted departmental overhead rate for applying overhead to production.

1. What is the budgeted indirect cost allocation rate for Department 1?  

2. What is the budgeted indirect cost allocation rate for Department 2?  

3. What is the total cost assigned to Job 101 based on normal costing?   

Answer 1

Indirect cost allocation rate:
Deptt-1
Total Manufacturing oH	56760
Divide: Budgeted mh of Deptt1	13200
OH rate per MH		4.3	per MH
Deptt-2
Total Manufacturing oh	41610
Divide: Budgeted DLH of deptt2	7300
OH rate per DLH		5.7	per DLH
Total cost allocated to Job
			Deptt1	Deptt2	Total
Direct material cost		12500	9100	21600
Direct labour cost		32500	32200	64700
Overheads allocated		7396	5301	12697
Total cost allocated to Job	52396	46601	98997
Total cost allocated to Job: $ 98,997