A B C Manufacturing overhead $930,000 $800,000 $750,000 Direct labor cost $600,000 $100,000 $600,000 Direct labor hours 50,000 40,000 40,000 Machine hours 100,000 120,000 150,000 During January, the job cost sheets showed the following costs and production data. A B C Direct materials used $92,000 $86,000 $64,000 Direct labor cost $48,000 $35,000 $50,400 Manufacturing overhead incurre $76,000 $74,000 $61,500 Direct labor hours 4,000 3,500 4,200 Machine hours 8,000 10,500 12,600 Instructions (a) Compute the predetermined overhead rate for each department. (b) Compute the total manufacturing costs assigned to jobs in January in each department. (c) Compute the under- or overapplied overhead for each department at January 31. a) Estimated overhead costs / Expected direct labor costs = predetermined overhead rate $930,000 / $600,000 = 155% b) Direct materials + direct labor costs + manufacturing overhead = Total manufacturing cost $92,000 + $48,000 + $74,400 = $214,400 c) Applied overhead cost – Incurred overhead cost = under- or overapplied overhead $74,400 – $76,000 = $1,600 under-applied overhead cost Acquatic Manufacturing uses a job order cost system in each of its three manufacturing departments. Manufacturing overhead is applied to jobs on the basis of direct labor cost in Department A, direct labor hours in Department B, and machine hours in Department C. In establishing the predetermined overhead rates for 2005 the following estimates were made for the year.
2Team Assignment, Part 1Mr. Beridon, it is highly recommended that you reframe from discontinuing any of your services at this time before Team B is allowed to conduct an analysis that could benefit your final decision. Within this request, Team B will explain how an Activity Based Costing (ABC) system could help in keeping both sod and trees as part of your business. Once the ABC tool is conducted, you will be able to see your potential benefits in the long run and prevent any loss in a quick business decision manner. Covering all activities, activity cost pool and cost driver that are allocated to your overhead costs can be reviewed through using the ABC System and creating a two stage process based on sod and trees that you wish to plant and sell.Potential Benefits Gained Using ABC SystemThere are a lot of potential benefits that Mr. Beridon's business can benefit from using activity-based costing. As a business that is set up to provide customized products and services, the use of having activity based costing is crucial to the business. Although implementing ABC can be a challenging task for any business, it offers a more accurate report compared to the traditional cost. With ABC Mr. Beridon can re-analyze the true cost for each item so he can place better prices that produce equal revenue. The ABC system distributes indirect cost based on a product's cost. ABC can be used to identify non-valued future costs and can help to better assign supplies to resourceful and beneficial activities.