Question

ob 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	$117,500		Number of moves	5,000
Engineering	128,000		Number of change orders	8,000
Other overhead	265,200		Direct labor hours	52,000

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	$24,400		$17,900		$2,500		$0
Direct materials	$6,800		$8,950		$12,000		$9,900
Direct labor cost	$970		$1,030		$1,570		$130

	Job 13-43		Job 13-44		Job 13-45		Job 13-46
Number of moves	41		46		35		6
Number of change orders	33		43		15		23
Direct labor hours	970		1,030		1,570		130

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

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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.

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

Answer 1

1. Activity Rates for the Overhead Cost Pools:

Cost Pool	Activity Rate
Materials Handling	$ 23.50 per move
Engineering	$ 16 per change order
Other Overhead	$ 5.1 per direct labor hour

2. Job order cost sheets:

Job	13-43	13-44	13-45	13-46
Beginning balance	$ 24,400	$ 17,900	$ 2,500	$ 0
Added during July:
Direct Materials	6,800	8,950	12,000	9,900
Direct Labor	970	1,030	1,570	130
Manufacturing Overhead:
Material Handling	963.50	1,081	822.50	141
Engineering	528	688	240	368
Other Overhead	4,947	5,253	8,007	663
Total Costs added during July	14,208.50	17,002	22,639.50	11,202
Total Manufacturing Costs	38,608.50	34,902	25,139.50	11,202
Cost of Goods Manufactured and Transferred Out	(38,608.50)	(34,902)	0	0
Ending Work in Process	0	0	25,139.50	11,202