Question

Custom Luxury Yatchs (CLY) makes three different styles of personal yachts: Baja; Saria; and Terra. Given that each yacht is significantly different from the others, the company utilizes a job-order costing system to allocate costs to different jobs. CLYs CEO, Sarah, decided that given the process for making the customized yachts was fairly labour intensive, that they would use direct labour hours as the basis for overhead allocation. In December, 2017, Jessica, the controller, estimated the following amounts for the year 2018:

Direct material		$22,265,000
Direct Labour		$198,000,000
Overhead		$110,000,000
Construction Labour Hours (DL)		625,000

Jessica recorded the following actual direct material and direct labour hours for the only three yachts started and completed during the last quarter of 2016:

	Baja	Saria	Terra
Direct Material	$12,500,000	$8,500,000	$15,000,000
Construction Labour Hours	62,000	50,000	68,000

Required

1. Compute the cost of each job using the current system of cost allocation (around to the nearest full dollar).

Answer 1

Answer:

	Baja	Saria	Terra
Direct Material	$ 12,500,000.00	$   8,500,000.00	$ 15,000,000.00
Direct Labor	$ 19,641,600.00	$ 15,840,000.00	$ 21,542,400.00
Overheads	$ 10,912,000.00	$   8,800,000.00	$ 11,968,000.00
Total	$43,053,600.00	$33,140,000.00	$48,510,400.00

Working note:

	Baja	Saria	Terra
Direct Material	12500000	8500000	15000000
Direct Labor	=198000000/625000*62000	=198000000/625000*50000	=198000000/625000*68000
Overheads	=110000000/625000*62000	=110000000/625000*50000	=110000000/625000*68000

In case of any doubt, please comment.