Question

Job Costs Using Activity-Based Costing

Heitger Company is a job-order costing firm that uses activity-based costing to apply overhead to jobs. Heitger identified three overhead activities and related drivers. Budgeted information for the year is as follows:

Activity	Cost	Driver	Amount of Driver
Materials handling	$ 72,000	Number of moves	3,000
Engineering	165,000	Number of change orders	10,000
Other overhead	280,000	Direct labor hours	50,000

Heitger worked on four jobs in July. Data are as follows:

	Job 13-43	Job 13-44	Job 13-45	Job 13-46
Beginning balance	$20,300	$19,800	$2,300	$0
Direct materials	$6,500	$8,900	$12,700	$9,800
Direct labor cost	$18,000	$20,000	$32,000	$2,400

	Job 13-43	Job 13-44	Job 13-45	Job 13-46
Number of moves	44	52	29	5
Number of change orders	30	40	20	20
Direct labor hours	900	1,000	1,600	120

By July 31, Jobs 13-43 and 13-44 were completed and sold. Jobs 13-45 and 13-46 were still in process.

Required:

1. Calculate the activity rates for each of the three overhead activities. Round all activity rates to the nearest cent.

Materials handling rate	$ per move
Engineering rate	$ per change order
Other overhead rate	$ per direct labor hour

Feedback

1. In job-order costing, departmental overhead rates and activity-based costing affect only the application of overhead and is put on the job-order costing sheet and must include all drivers for which overhead is applied.

2. Prepare job-order cost sheets for each job showing all costs through July 31.

If an amount is zero, enter "0".

Heitger Company
Job-Order Cost Sheets
	Job 13-43	Job 13-44	Job 13-45	Job 13-46
Balance, July 1	$	$	$	$
Direct materials
Direct labor cost
Materials handling
Engineering
Other overhead
Total	$	$	$	$

Feedback

2. The job-order cost sheet must include a unique number or name for this particular job, all direct costs, and all overhead costs associated with the job.

3. Calculate the balance in Work in Process on July 31.
$

4. Calculate the cost of goods sold for July.
$

5. What if Job 13-46 required no engineering change orders? What is the difference in the new cost of Job 13-46?

$   lower

How would the cost of the other jobs be affected?
no effect

Answer 1

1)	Activity rates
	Materials handling rate			24	per move
	engineering rate			16.5	per change order
	other overhead rate			5.6	per direct labor hour
2)	Job order cost sheet
				job 13-43	job 13-44	job13-45	job 13-46
	Balance,july 1			20,300	19,800	2,300	0
	direct materials			6,500	8,900	12,700	9,800
	direct labor cost			18000	20000	32000	2400
	materials handling			1056	1248	696	120
	engineering			495	660	330	330
	other overhead			5040	5600	8960	672
	total			51,391	56,208	56,986	13,322
3)	Balance of work in process july 31					70,308
	(job 45 and job 46)
4)	cost of goods sold for july					107,599
	(job 43 and 44)
5)	difference in cost will be			330	lower