Question

QUESTION 3                                                                                                           

Company DEF Sdn Bhd has two production departments; Department FRONT and Department BACK. The company uses the basis direct labor hour to determine predetermine overhead rate. A total of 3 300 units were produced on Job 1111.

The following information relates to both departments for the year 2019:

	Department FRONT	Department BACK
Budgeted manufacturing overhead	RM 100 000	RM 110 000
Budgeted direct labor hours	88 000	33 000
Budgeted machine hours	8 000	22 000

The company shows the following information relates to Job 1111:

Materials requisitioned                                  RM 90 000

Direct labor cost                                             RM 77 000

	Department FRONT	Department BACK
Direct labor hours:	6 000 hours	3 300 hours
Machine hours:	1 000 hours	900 hours

                                   

Required:

1. Assume that, the company uses a plant-wide predetermined overhead based on direct labor hour. Calculate the total cost and the unit cost for Job 1111.

Answer 1

Requirement a:

1. Total Cost

Particulars	RM
Materials requisitioned	90,000
Direct labor cost	77,000
Overhead cost	16,182
Total Cost	183,182

2. Unit Cost

Unit cost = RM183,182 / 3,300 Units = $55.51 per unit

Working notes:

a. Plant-wide predetermined overhead rate

Plant-wide predetermined overhead rate = Total Overhead cost / Total direct labor hours

Total Overhead cost = RM100,000 + RM110,000 = RM210,000

Total direct labor hours = 88,000 + 33,000 = 121,000

Plant-wide predetermined overhead rate = RM210,000 / 121,000 direct labor hours = $1.74 per direct labor hours

b. Overhead cost allocated to Job 111

Total direct labor hours = 6,000 + 3,300 = 9,300 hours

Overhead cost = 9,300 hours * $1.74 per direct labor hours = $16,182

All the best...