Question

Zayner Company is a job-order costing firm that use activity based costing to apply overhead to jobs. Zayner identified three overhead activities and their related drivers. Budgeted information for the year is as follows:
Zayner Company is a job order costing company that uses activity-based costing (ABC) to apply manufacturing overhead to different jobs. Zayner identified three activities and the related cost drivers. The budgeted information (budget) for the year is as follows:

Activity Cost Driver Amount of Driver

Engineering design $ 120,000 Engineering Hours 3,000 hrs
Purchasing 80,000 Number of parts 10,000 parts
Other overhead 250,000 Direct labor hours 40,000 hours

Zayner worked on five jobs in July. Data are as follows:

Job # 60 Job # 61 Job # 62 Job # 63 Job # 64

Balance, 7/1 $ 32,450 $ 40,770 $ 29,090 $ 0 $ 0
Direct materials $ 26,000 $ 37,900 $ 25,350 $ 11,000 $ 13,560
Direct labor $ 40,000 $ 38,500 $ 43,000 $ 20,900 $ 18,000
Engineering hours 20 10 15 100 200
Number of parts 150 180 200 500 300
Direct labor hours 2,500 2,400 2,600 1,200 1,100

As of July 31, jobs 60 and 62 were completed and sold. The remaining jobs remain in process.

Required:

1. Calculate the activity rates for each of the three manufacturing overheads.
2. Prepare job order cost sheets for each job that show all costs through July 31.
3. What is the cost of each job at the end of July?

Answer 1

Req 1.
Activity		Total OH	Drivers	Rate
Engineering design	120000	3000	40	per hour
Purchasing	80000	10000	8	per part
Other overheads	250000	40000	6.25	per hour
Req 2 and 3
JOB no.			60	61	62	63	64
Beginning balance		32450	40770	29090	0	0
Current cost
Material cost		26000	37900	25350	11000	13560
Labour cost		40000	38500	43000	20900	18000
Activity cost
Engineering design@ 40 per hour	800	400	600	4000	8000
Purchasing @8 per part	1200	1440	1600	4000	2400
Other overheads @6.25 per DLH	15625	15000	16250	7500	6875
TOTAL COST		116075	134010	115890	47400	48835