Question

Dillon Products manufactures various machined parts to customer specifications. The company uses a job-order costing system and applies overhead costs to jobs on the basis of machine-hours. At the beginning of the year, the company used a cost formula to estimate that it would incur $4,170,000 in manufacturing overhead cost at an activity level of 556,000 machine-hours.

The company spent the entire month of January working on a large order for 8,900 custom made machined parts. The company had no work in process at the beginning of January. Cost data relating to January follow:

a. Raw materials requisitioned for production, $269,000 (80% direct and 20% indirect).

b. Labor cost incurred in the factory, $177,000, of which $59,000 was direct labor and $118,000 was indirect labor.

c. Depreciation recorded on factory equipment, $63,100.

d. Other manufacturing overhead costs incurred, $84,200 (credit Accounts Payable).

e. Manufacturing overhead cost was applied to production on the basis of 40,760 machine-hours actually worked during the month.

f. The completed job was moved into the finished goods warehouse on January 31 to await delivery to the customer. (In computing the dollar amount for this entry, remember that the cost of a completed job consists of direct materials, direct labor, and applied overhead.)

Required:

1. Calculate the Actual Manufacturing Overhead Costs Incurred.

Actual Manufacturing Overhead Costs Incurred: $

2. Compute the amount of Manufacturing Overhead Applied to Production.

Manufacturing Overhead Applied to Production: $

3. Calculate the total Manufacturing Cost for the job completed in January.

Total Manufacturing Cost for the job: $

4. Compute the unit product cost that will appear on the job cost sheet. (Do not round intermediate calculations. Round your answer to 2 decimal places.)

Unit Product Cost: $

Answer 1

1. Actual Manufacturing Overhead Costs incurred :

2. Manufacturing overhead applied to production:

Estimated manufacturing overhead per hour = 4,170,000/556,000 = $7.5 per hour

Applied overhead = Actual hours x rate per hour = 40,760 x 7.5 = $305,700

3. Total manufacturing cost of the job = Direct material + Direct labour + applied overhead = (269,000 x 80%) + 59,000 + 305,700 = $579,900

4. Unit product cost = 579,900/8,900 = $65.16