Chapter 21 Job costing (分批成本計算法)
21.1
Name : _________________
Serial No: _____
Introduction
• Job costing means how to account (計算) for the costs of a job order (一份工作通知單的成本).
• The job costing system can be used by both manufacturing and service (製造業或服務業) organizations.
21.2
•
•
•
•
Job orders (工作通知單)
A job order is a customer order for an individual unit or multiple units of a distinct product or service (特製產品或服務).
It is usually custom-made (度身訂造).
Once a job order is identified (收到), a costing system (成本計算系統) is designed to trace the costs to that particular job.
This costing system is known as job costing (分批成本計算法).
21.3
Job costing system (分批成本計算系統)
• A job costing system is a costing system that accounts (計算) for the cost associated with (有關的成本) a particular job.
• This involves (涉及) how to account (處理) the following three main elements (主要元素) of manufacturing costs:
(直接製造成本)
(間接製造成本)
Example:
During November 2010, Prestige Kitchens worked on several different orders for specialty kitchen cabinets.
Job No.121
• Customer, J Lee
• Job began: 2 November
• Job completed: 13 November
Step 1
Identify the job order (識別該批工作的工作通知單)
• The job order is Job No.121.
• It includes two identical sets of kitchen cabinets specially designed for J Lee.
Step 2
Identify the direct manufacturing costs of the job (找出該批工作的直接製造成本)
• Suppose only two categories of direct manufacturing costs are identified:
— Direct materials: can be obtained from the material requisition form (領料單)
— Direct labour: can be obtained from workers’ time cards (工時記錄卡) and payroll records (支薪記錄)
Step 3
Determine the manufacturing overhead absorption rate (計算製造費用吸收率)
• Manufacturing overheads (製造費用) are indirect costs (間接成本) that are difficult to trace to (追溯) a particular cost object
(特定成本對象). So managers need to absorb (分派) manufacturing overheads into each job by applying an absorption rate
(運用吸收率).
e.g., Find out how much of water and electricity attribute (歸於) to produce two kitchen cabinets
• The procedures for determining the absorption rates are:
1
A cost pool (成本歸集) has to be created. A cost pool is a group of individual cost items (個別的成本項目組合而成).
There can be one cost pool or several different cost pools. For example, Prestige Kitchens can create a single cost pool (單
一的成本歸集) or two cost pools such as Repairs and maintenance on machinery and other manufacturing overheads.
2
An absorption base (吸收基礎) has to be determined for the cost pool. This is the basis (基礎) on which manufacturing
overheads (製造費用) are absorbed (分派) into different products (不同的產品). For example, Prestige Kitchens chose
direct labour hours (直接人工小時) as the manufacturing overhead absorption base.
3
Compute the manufacturing overhead absorption rate (計算製造費用吸收率).
Total value of the cost pool
Total quantity of the absorption base
Example: Prestige Kitchen’s results:
Actual total manufacturing overheads $3,360,000 (given)
Actual total direct labour hours
120,000
(given)
The manufacturing overhead absorption rate is = $3,360,000 / 120,000 = $28 per direct labour hour
1
Step 4
Compute the manufacturing overheads absorbed into the job (計算吸收的製造費用)
• The manufacturing overheads absorbed into a particular job are calculated as follows:
Job' s actual quantity of the absorption base  Manufacturing overhead absorption rate
• Example:
Assume 120 direct labour hours were spent on Job No. 121 (given)
The amount of manufacturing overheads absorbed into Job No. 121
= Job’s actual quantity of the absorption base x Manufacturing overhead absorption rate
= 120  $28
= $3,360
Step 5
Compute the total manufacturing costs of the job (計算該批工作的總製造成本)
• The total manufacturing costs is given by adding all direct and indirect manufacturing cost associated with the job order.
• A job cost sheet (分批成本單) shows all the costs associated with the completion (完成) of a particular job order.
• Example: Job No. 121
Direct materials
32,000
Direct labour
9,600
Manufacturing overheads absorbed
3,360
Total manufacturing costs
44,960
The manufacturing costs of each set of kitchen cabinets for Job No. 121 = $44,960  2 = $22,480
Classwork 1
1 Winter Ltd calculates its overhead absorption rate annually on the basis of machine hours. For the year ended 31 December
2012, the total manufacturing overheads were $345,000 and the total machine hours were 25,000 hours.
(a) Calculate the overhead absorption rate for the year ended 31 December 2012.
(b) Calculate the manufacturing overheads absorbed of Job No. 100 for the year ended 31 December 2012 if the machine
hours of the job No. 100 are 10,000 hours.
(a)
(b)
Overhead absorption rate = Total manufacturing overheads  Total machine hours
= $345,000  25,000 hours
= $13.8 per machine hour
Manufacturing overheads absorbed = Actual machine hours  overhead absorption rate
= 10,000  $13.8
= $138,000
2 The following data relate to Job No. QQ23 during a period:
Opening work-in-progress
$32,720
Direct materials added
$80,000
Direct labour
$14,000
Direct labour hours
600 hours
Total manufacturing overheads
$123,000
Total direct labour hours
41,000 hours
Manufacturing overheads were absorbed on the basis of direct labour hours.
(a) Calculate the manufacturing overhead absorption rate and the manufacturing overheads absorbed of Job No. QQ23.
(b) Determine the selling price of Job No. QQ23, assuming a mark-up of 40% is required.
(c) What is a job costing system?
(a)
Manufacturing overhead absorption rate = $123,000  41,000 = $3 per direct labour hour
Manufacturing overheads absorbed of QQ 23 = 600  $3 = $1,800
(b)
Total manufacturing costs = $32,720 + $80,000 + $14,000 + $1,800 = $128,520
Selling price for job No. QQ23 = $128,520 x (1 + 40%) = $179,928
(c)
A job costing system is a costing system that accounts for the costs associated with a particular job.
The three main elements of manufacturing costs are direct materials, direct labour and
manufacturing overheads.
2
3 Creative Ltd prints books, magazine and booklets in accordance with customers’ requirements. Job No. 228 has been completed.
The costs related to this job are as follows:
Direct materials:
Type
Quantity
Paper
200,000 sheets
Ink
10 cartridges
Direct labour:
Type
Editing
Printing
Price
$40 per 1,000 sheets
$600 per cartridge
Hours
30
20
Hourly wage rate
$50
$25
Production overheads were absorbed on the basis of total direct labour hours. The absorption rate was $8 per labour hour.
Administrative overheads were charged on the basis of 10% of total production costs.
The selling price for this job was quoted at $23,000.
(a)
(b)
(a)
Calculate the total costs and the profit (or loss) for Job No. 228.
How can the management of Creative Ltd make use of the above job cost information?
Total production costs = (200,000 ÷ 1,000 × $40) + (10 × $600) + (30 × $50) + (20 × $25) + (50 × $8)
= $16,400
Administrative overheads = ($16,400 × 10%) = $1,640
Total costs = $16,400 + $1,640 = $18,040
Profit = $23,000 − $18,040 = $4,960
(b)
• Pricing other jobs of a similar type
• Identifying any significant variances between estimated costs and actual costs
• Acting as a basis for future estimates
21.4
Absorption of manufacturing overheads: further consideration
21.4.1 Annual vs. monthly overhead absorption rate (按年與按月的間接費用吸收率)
Why do we calculate the manufacturing overhead absorption rate and absorb the overheads at the end of the year?
1 Some overheads cannot be ascertained until the end of a year, e.g., depreciation, year-end bonuses.
2 Some overheads are incurred in a particular month but their benefits will last several months. Using an annual period helps
smooth out costs that are not incurred evenly throughout the year.
3 There are usually seasonal fluctuations in output during a year. An annual rate helps smooth out the effects of monthly
variations in output.
Classwork 2
1 Given the following information about a manufacturer for a certain year:
Monthly variable overheads ($)
Monthly fixed overheads ($)
High-output months
100,000
50,000
Low-output months
50,000
50,000
(a)
(b)
(a)
(b)
Machine hours
2,000
2,000
Calculate the monthly overhead absorption rates for high- and low-output months respectively, using machine hours as
the absorption base.
What problem will arise using a monthly rate for the absorption of overheads?
Monthly variable overhead absorption rate:
High-output months: $100,000 ÷ 2,000 = $50 per machine hour
Low-output months: $50,000 ÷ 1,000 = $50 per machine hour
Monthly fixed overhead absorption rate:
High-output months: $50,000 ÷ 2,000 = $25 per machine hour
Low-output months: $50,000 ÷ 1,000 = $50 per machine hour
Jobs done during high-output months will bear a smaller share of fixed overheads. The opposite will
happen during low-output months. An annual rate thus helps smooth out the effects of monthly
variations in output in the absorption of fixed overheads
3
21.4.2 Actual vs. predetermined overhead absorption rate (實際與預定間接費用吸收率)
Actual overhead absorption rate (實際間接費用吸收率)
• In the Prestige Kitchens example, we are using the actual costs in determining its manufacturing overhead absorption rate.
• This is known as actual costing (實際成本法), where costs are accounted for (計算) on the basis of actual costs incurred.
Predetermined overhead absorption rate (預定間接費用吸收率)
• Many businesses do not wait until all the overheads are ascertained at the end of a year.
• They calculate a predetermined overhead absorption rate for each cost pool (成本歸集) at the beginning of a year. The
overheads are absorbed into jobs on a timely (及時) basis.
Predetermined overhead absorption rate
= Budgeted total value of the cost pool ÷ Budgeted total quantity of the absorption base
• This gives rise to normal costing (正常成本計算法), where indirect costs are accounted (計算) for on the basis of
predetermined overhead absorption rates (預定間接費用吸收率).
• Under normal costing, the absorption of indirect costs is calculated as:
The absorption of indirect costs = Actual quantity of the absorption base x Predetermined overhead absorption rate
21.4.3 Over- or under-absorbed overheads (多吸收與少吸收間接費用)
• Predetermined overhead absorption rates may be inaccurate (不準確).
• As a result, the overheads absorbed may differ from the actual overheads (實際費用) incurred during that period.
• Under-absorption (少吸收間接費用):
— The predetermined amount of overheads absorbed < The actual amount of overheads incurred.
• Over-absorption (多吸收間接費用):
— The predetermined amount of overheads absorbed > The actual amount of overheads incurred.
• The amount of over- or under-absorbed overheads should be adjusted in the profit and loss account for the period
Classwork 3
1 Winter Ltd calculates its predetermined overhead absorption rate annually on the basis of machine hours. The total budgeted
manufacturing overheads were $345,000 and the total budgeted machine hours were 25,000 hours. Total actual
manufacturing overheads and machine hours for the year were $356,000 and 26,000 hours, respectively.
(a) Calculate the predetermined overhead absorption rate for the year ended 31 December 2012.
(b) Determine the under- /over-absorbed manufacturing overheads for the year ended 31 December 2012.
(a)
(b)
Predetermined overhead absorption rate = $345,000  25,000 hours = $13.8 per machine hour
Total manufacturing overheads absorbed = 26,000  $13.8 = $358,800
Total manufacturing overheads incurred = $356,000
The amount of over-absorbed manufacturing overheads = $358,800 − $356,000 = $2,800
2 Sunshine Ltd uses a job costing system with two categories of direct manufacturing costs: direct materials and direct labour,
and one manufacturing overhead cost pool. It absorbs manufacturing overheads into products using direct labour cost. The
following information is provided for the year ended 31 December 2010:
Direct materials cost
Direct labour cost
Manufacturing overheads
(a)
(b)
(c)
(a)
(b)
(c)
Budget
$1,200,000
$1,000,000
$1,500,000
Actual
$1,400,000
$900,000
$1,600,000
Compute the predetermined manufacturing overhead absorption rate for the year.
In June 2010, the job cost sheet for Job No. 432 contained the following information:
Direct materials used
$30,000
Direct labour cost
$25,000
Compute the total manufacturing cost of job No. 432 using normal costing.
At the end of 2010, compute the under- or over-absorbed manufacturing overheads for the year under normal costing.
The predetermined manufacturing overhead absorption rate = $1,500,000 ÷ $1,000,000 = 150%
The total manufacturing costs of Job No. 432 = $30,000 + $25,000 + ($25,000 × 1.5) = $92,500
Total manufacturing overheads absorbed = $900,000 × 1.5 = $1,350,000
Total manufacturing overheads incurred = $1,600,000
Under-absorbed manufacturing overheads = $1,600,000 − $1,350,000 = $250,000
4
21.4.4 Single vs. multiple overhead absorption rates (單一與多個間接費用吸收率)
Single absorption rates (單一費用吸收率)
• We used a single rate (blanket rate or plant-wide rate) (單一,全廠吸收率) in the example of Prestige Kitchens.
Multiple overhead absorption rates (多個間接費用吸收率)
• Some businesses use multiple overhead absorption rates by creating various cost pools (建立多個成本歸集) and selecting (選
取) their appropriate absorption bases (合適的吸收基礎) or cost driver (成本動因).
• This helps generate (有助獲取) more accurate (準確) costing information.
• However, the greater the number of cost pools and overhead absorption rates, the more time and resources will be required to
build up (建立) the cost pools and work out (計算) the absorption rates.
Example:
Suppose Prestige Kitchens has created two cost pools for manufacturing overheads:
Cost pool
1. Repairs and maintenance on machinery
2. Other manufacturing overheads
Cost driver
Machine hours
Direct labour hours
Given the following information budgeted at 1 Jan 2010:
Repairs and maintenance on machinery
$1,400,000
Other manufacturing overheads
$1,600,000
Direct labour hours
100,000
Machine hours
20,000
The predetermined overhead absorption rates are:
Cost pool
Predetermined overhead absorption rate
1. Repairs and maintenance on machinery
$1,400,000 ÷ 20,000 = $70 per machine hour
2. Other manufacturing overheads
$1,600,000 ÷ 100,000 = $16 per direct labour hour
Assume 100 machine hours and 120 direct labour hours were incurred on Job No. 121, this job would absorb the following
manufacturing overheads:
Repairs and maintenance on machinery (100  $70) $7,000
$1,920
Other manufacturing overheads (120  $16)
Total manufacturing overheads
$8,920
Classwork 4
1 Data of a firm for the past period are as follows:
Total machine hours
Number of material requisitions
Number of purchase orders
Number of production runs
Production overheads:
Short run variable costs
Production scheduling costs
Stores receiving costs
Materials handling costs
(a)
(b)
8,000
350
200
200
$
560,000
600,000
50,000
70,000
Cost drivers:
Machine hours
Production runs
Purchase orders executed
Requisitions raised
Calculate the cost driver rate for each of the four production overheads activities.
Assume 6,000 machine hours, 50 production runs, 100 purchase orders and 200 material requisitions were incurred on
product P1, calculate the production overheads for P1.
(a)
Cost driver rates:
Short run variable costs per machine hour ($560,000 ÷ 8,000) = $70 per machine hour
Production scheduling costs per production run ($600,000 ÷ 200) = $3,000 per production runs
Stores receiving costs per purchase order ($50,000 ÷ 200) = $250 per purchase orders
Materials handling costs per requisition ($70,000 ÷ 350) = $200 per material requisitions
(b)
The production overheads absorbed for P1
= 6,000 x $70 + 50 x $3,000 + 100 x $250 + 200 x $200
= $635,000
5
21.5
More than one production department (多於一個生產部門)
If the job order involves (涉及) several production departments, a separate manufacturing overhead absorption rate (個別製造
費用吸收率) has to be created (建立) for each production department (每個生產部門). This requires the apportionment of
manufacturing overheads (分派製造費用) between the various production departments (不同的生產部門). After apportioning
the overheads among departments, we can find the total manufacturing overhead absorbed by the job.
Process of finding the total manufacturing overhead absorbed by the job:
1 The apportionment of overheads among departments (把費用攤派到不同部門)
If there is more than one manufacturing overhead, we need to apportion (攤派) the overheads between the production
departments before calculating the overhead absorption rate (費用吸收率) for each production department.
(a) An appropriate basis of apportionment has to be selected for each type of overhead (為每種類型製造費用選取一個合
適的費用攤派基礎). The basis of apportionment (攤派基礎) must be a strong cost driver (合適成本動因) of the
overhead. For example,
Manufacturing overheads:
Basis of apportionment
Factory rent
Factory area occupied
Repairs and maintenance on machinery
Machine value
(b)
Find out the total manufacturing overheads for each production department according to the basis of apportionment.
2 Calculate the predetermined overhead absorption rate among departments (計算不同部門預定間接費用吸收率)
3 Calculate the total manufacturing overhead to be absorbed by the job (計算工作總製造成本)
Example 1
One manufacturing overhead for two or more production department (一個製造費用於多個生產部門)
J Hui operates a plant producing custom-made shoes. There are two manufacturing departments: cutting and assembly. The
budgeted manufacturing overheads and levels of activity for the year ended 31 December 2010 were as follows:
Manufacturing overheads
Machine hours
Direct labour hours
Cutting department
$250,000
1,000,000
160,000
Assembly department
$320,000
200,000
800,000
Job No. 334 was completed during the year. It consumed 5,000 and 850 machine hours in the cutting and assembly departments,
respectively, and 760 and 3,600 direct labour hours in the cutting and assembly departments, respectively.
(a)
(b)
(c)
Absorb the manufacturing overheads into Job No. 334, using a plant-wide (全廠) predetermined overhead absorption rate
based on direct labour hours.
Absorb the manufacturing overheads into Job No. 334, using departmental (部門) predetermined overhead absorption rates
for each manufacturing department. The absorption base for cutting and assembly department is machine hours and direct
labour hours respectively.
During 2010, the record for Job No. 334 showed the following information:
Cutting
Assembly
department
department
Direct materials consumed
$18,000
$1,200
Direct manufacturing labour costs
$2,000
$800
Calculate the total manufacturing cost of Job No. 334.
Answer:
(a)
Plant-wide predetermined overhead absorption rate
= ($250,000 + $320,000) ÷ (160,000 + 800,000) = $0.59375 per direct labour hour
Manufacturing overheads absorbed into Job No. 334 = $0.59375 × (760 + 3,600) = $2,588.75
(b)
Departmental predetermined overhead absorption rate for the cutting department
= $250,000 ÷ 1,000,000 = $0.25 per machine hour
Departmental predetermined overhead absorption rate for the assembly department
= $320,000 ÷ 800,000 = $0.4 per direct labour hour
Manufacturing overheads absorbed into Job No. 334 = (5,000 × $0.25) + (3,600 × $0.4) = $2,690
(c)
Total manufacturing costs of Job No. 334 = ($18,000 + $2,000) + ($1,200 + $800) + $2,690 = $24,690
6
Several manufacturing overhead for two or more production department (多個製造費用於多個生產部門)
M Lee operates a toy factory using a job costing system. The factory has two production departments: (1) machining and (2)
assembly and two cost pools have also been created for manufacturing overheads: (1) machining department overheads and (2)
assembly department overheads. Two categories of direct manufacturing costs have been identified: direct materials and direct
labour.
The following figures were budgeted for the factory in April 2009 for the year ended 31 Mar 2010:
1.
2.
Manufacturing overheads:
Factory rent
Factory water and electricity
Repairs and maintenance
Indirect labour salaries
Other information:
Direct labour hours
Machine hours
Factory area occupied (sq. m.)
Machine value
No. of indirect workers
(a)
(b)
Basis of apportionment
Factory area occupied
Factory area occupied
Machine value
No. of indirect workers
$600,000
$150,000
$60,000
$500,000
Machining department
50,000
100,000
300
$1,000,000
5
Assembly department
100,000
20,000
150
$200,000
15
Find the total manufacturing overheads for each production department.
Choose an appropriate absorption base for the manufacturing overheads of the machining department and the assembly
department, respectively. Hence compute the predetermined overhead absorption rates for the machining department and
the assembly department.
Suppose a job, Job No. 222, was completed the year and its job cost sheet shows the following actual results:
Machining department
Assembly department
Direct materials used
$24,000
$20,000
Direct labour costs
$8,000
$32,000
Direct labour hours
200
800
Machine hours
600
60
(c)
Compute the total manufacturing cost of Job No. 222
(a)
Machining department
Factory rent
Factory water and electricity
Repairs and maintenance
Indirect labour salaries
Total
$600,000 x (300 / 450) = $400,000
$150,000 x (300 / 450) = $100,000
$60,000 x (1,000,000/1,200,000) = $50,000
$500,000 x (5 / 20) = $125,000
$675,000
Assembly department
$600,000 x (150 / 450) = $200,000
$150,000 x (150 / 450) = $50,000
$60,000 x (200,000/1,200,000) = $10,000
$500,000 x (15 / 20) = $375,000
$635,000
(b)
The absorption base for the manufacturing overheads of the machining department should be machine hours
because this department tends to rely more heavily on machines in production.
The absorption base for the manufacturing overheads of the assembly department should be direct labour
hours because this department tends to rely more heavily on labour in production.
Machining department’s overhead absorption rate = $675,000 ÷100,000 = $6.75 per machine hour
Assembly department’s overhead absorption rate = $635,000 ÷100,000 = $6.35 per direct labour hour
(c)
Direct materials = $24,000 + $20,000 = $44,000
Direct labour = $8,000 + $32,000 = $40,000
Manufacturing overheads absorbed:
Machining department = 600 x $6.75 = $4,050
Assembly department = 800 x $6.35 = $5,080
Total manufacturing costs of Job No. 222 = $44,000 + $40,000 + $4,050 + $5,080 = $93,130
7
Classwork 5
1 Pitt Smith Ltd uses a job costing system in its plant in Tai Po. The company has two production departments: the wiring
department and the polishing department. The company has selected machine hours as the absorption base for the wiring
department and direct manufacturing labour costs as the absorption base for the polishing department.
The 2005 budget for the Tai Po plant was as follows:
Wiring
department
Manufacturing overheads
$13,000,000
Direct manufacturing labour costs
$2,080,000
Direct manufacturing labour hours
42,000 hrs
Machine hours
340,000 hrs
Polishing
department
$10,600,000
$5,800,000
210,000 hrs
42,500 hrs
The actual figures at the end of 2005 were as follows:
Wiring
department
Manufacturing overheads
$13,400,000
Direct manufacturing labour costs
$2,400,000
Machine hours
365,000 hrs
Polishing
department
$10,800,000
$5,950,000
40,500 hrs
(a)
(b)
(c)
(d)
Calculate the predetermined overhead recovery rates for the two departments for 2005.
Calculate the under-or over-absorbed manufacturing overhead for each department.
During 2005, the record card for Job T44 showed the following information:
Wiring
Polishing
department
department
Direct materials consumed
$124,300
$15,800
Direct manufacturing labour costs
$60,000
$4,600
Direct manufacturing labour hours
3,200 hrs
150 hrs
Machine hours
250 hrs
40 hrs
Given the information in other parts of this question, calculate the total manufacturing overhead to be absorbed by Job
T44.
Given the information in other parts of this question, calculate the total production cost and unit product cost of Job T44 if
there were 500 units of output produced under the job.
(a)
Predetermined overhead recovery rates for Wiring department:
= $13,000,000 ÷ 340,000 = $38.24 per machine hour
Predetermined overhead recovery rates for Polishing department:
= $10,600,000 ÷ $5,800,000 = 182.76%
(b)
Manufacturing overhead incurred for Wiring department = $13,400,000
Manufacturing overhead absorbed for Wiring department = 365,000 x $38.24 = $13,957,600
Over-absorption for Wiring department = $13,957,600 − $13,400,000 = $557,600
Manufacturing overhead incurred for Polishing department = $10,800,000
Manufacturing overhead absorbed for Polishing department = $5,950,000 x 182.76% = $10,874,220
Over-absorption for Polishing department = $10,874,220 − $10,800,000 = $74,220
(c)
Manufacturing overhead absorbed for Wiring department = 250 x $38.24 = $9,560.00
Manufacturing overhead absorbed for Polishing department = $4,600 x 182.76% = $8,406.96
Total manufacturing overhead absorbed by Job T44 = $9,560.00 + $8,406.96 = 17,966.96
(d)
Total job cost = ($124,300 + $15,800) + ($60,000 + $4,600) + 17,966.96 = $222,666.96
Unit product cost = $222,666.96 ÷500 = $445.33
8
2 Yan Hong Manufacturing Limited makes two products, P1 and P2. Data for the past period are as follows:
Products
Production units
Direct costs per unit
Total machine hours
Number of material requisitions
Number of purchase orders
Number of production runs
Production overheads:
Short run variable costs
Production scheduling costs
Stores receiving costs
Materials handling costs
(a)
(b)
(c)
(a)
P1
2,000
$220
6,000
200
100
50
$
560,000
600,000
50,000
70,000
P2
2,500
$200
2,000
150
100
150
Cost drivers:
Machine hours
Production runs
Purchase orders executed
Requisitions raised
Calculate the unit production cost for each product if all production overheads are absorbed on a machine hour basis.
Calculate the unit production cost for each product if activity based costing approach is applied. Show also the cost driver
rate for each of the four activities.
Compare and comment on the unit production cost calculated using the two methods in (a) and (b) above.
Production overhead absorption rate:
= ($560,000 + $600,000 + $50,000 + $70,000) ÷ (6,000 + 2,000)
= $160 per machine hour
Per unit:
Direct costs
Production overheads
$160 × 6,000 ÷ 2,000
$160 × 2,000 ÷ 2,500
Production costs
(b)
P1
$
220
P2
$
200
480
−
700
−
128
328
Cost driver rates:
Short run variable costs per machine hour = [$560,000 ÷ (6,000 + 2,000)]
= $70 per machine hour
Production scheduling costs per production run = [$600,000 ÷ (50 + 150)]
= $3,000 per production runs
Stores receiving costs per purchase order [$50,000 ÷ (100 + 100)] = $250 per purchase orders
Materials handling costs per requisition [$70,000 ÷ (200 + 150)] = $200 per material requisitions
The unit production cost for P1
= [(6,000 x $70 + 50 x $3,000 + 100 x $250 + 200 x $200) ÷ 2,000] + $220 = $537.5
The unit production cost for P2
= [(2,000 x $70 + 150 x $3,000 + 100 x $250 + 150 x $200) ÷2,500] + $200 = $458
(c)
Using the unit production cost in (a) results in over-pricing P1 because it takes more machine hours
to produce P1 and under-pricing P2 because it takes fewer machine hours to produce P2. The activity
based costing approach leads to better overhead allocation because of the close relationship
between the cost pools and the cost drivers used to allocate the overhead costs.
9
21.6
Re-apportionment of overheads of service departments (服務部門的間
接費用的再分攤)
Service departments (服務部門) are not directly involved (直接參與) in manufacturing but provide support service (提供支援服
務 ) for manufacturing departments. The overheads of these service departments (服務部門的間接費用 ) have to be
re-apportioned (再分攤) to manufacturing departments (生產部門) before calculating the manufacturing overhead absorption
rate for each manufacturing department (每個生產部門的製造費用吸收率).
21.6.1 No inter-service work done (沒有交互服務)
There is only one service department (只有一個服務部門), or if there is more than one service department, but no reciprocal
services are provided (沒有互相提供交互服務) among the service departments.
Example 2
A Wong operates a garment factory using a job costing system. The factory has two manufacturing departments: (1) machining and
(2) assembly; and two service departments: (1) stores and (2) maintenance. The following figures were budgeted for the factory in
January 2010 for the year ended 31 December 2010:
1. Manufacturing overheads:
Indirect labour salaries: Machining
Assembly
Stores
Maintenance
Production supervisors’ salaries
Factory rent
Factory utilities
Depreciation on machinery
$40,000
$180,000
$30,000
$50,000
$100,000
$240,000
$30,000
$50,000
2. Other information:
Direct labour hours
Machine hours
Factory area occupied (sq. m.)
Machine value
No. of employees
Materials issued
No. of maintenance hours
Department
Manufacturing
Service
Machining
Assembly
Stores
Maintenance
20,000
150,000


200,000
50,000


200
300
60
40
$700,000
$150,000
$50,000
$100,000
10
30
5
5
$120,000
$80,000


3,200
800


3. Additional information:
The apportionment basis for the manufacturing overheads of the stores department should be the amount of materials issued,
while the apportionment basis for the maintenance department should be the number of hours spent on maintenance work.
The absorption base for the manufacturing overheads of the machining department should be machine hours, while the
manufacturing overhead absorption base for the assembly department should be direct labour hours.
The following bases of apportionment were selected for the manufacturing overheads:
Production supervisors’ salaries
Factory rent
Factory utilities
Depreciation on machinery
Basis of apportionment
No. of employees
Factory area occupied
Factory area occupied
Machine value
10
(a)
Find the manufacturing overheads that are allocated and apportioned among the various departments.
Service
Stores
Indirect labour salaries
Production supervisors’ salaries
Factory rent
Factory utilities
Depreciation on machinery
Total
Maintenance
$30,000
$100,000 x (5/50) = $10,000
$240,000 x (60/600)=$24,000
$30,000 x (60/600)= 3,000
$50,000 x( 50,000/1,000,000)=$2,500
$69,500
$50,000
$100,000 x (5/50) = $10,000
$240,000 x (40/600) = $16,000
$30,000 x (40/600) = 2,000
$50,000 x( 100,000/1,000,000)=$5,000
$83,000
Manufacturing
Machining
Indirect labour salaries
Production supervisors’ salaries
Factory rent
Factory utilities
Depreciation on machinery
Total
Assembly
$40,000
$100,000 x (10/50) = $20,000
$240,000 x (200/600)=$80,000
$30,000 x (200/600)= 10,000
$50,000 x (700,000/1,000,000)=$35,000
$185,000
$180,000
$100,000 x (30/50) = $60,000
$240,000 x (300/600)=$120,000
$30,000 x (300/600)= 15,000
$50,000 x (150,000/1,000,000)=$7,500
$382,500
Re-apportionment of service departments’ overheads
Stores
Maintenance
Total
(b)
$69,500 x (120,000/200,000) = $41,700
$83,000 x (3,200/4,000) = $66,400
$293,100
$69,500 x (80,000/200,000) = $27,800
$83,000 x (800/4,000) = $16,600
$426,900
Calculate the predetermined manufacturing overhead absorption rates for the machining and assembly departments.
Machining department’s predetermined manufacturing overhead absorption rate
= $293,100 ÷200,000 = $1.4655 per machine hour
Assembly department’s predetermined manufacturing overhead absorption rate
= $426,900 ÷150,000 = $2.846 per direct labour hour
(c)
Suppose a job, job No. 168, was completed during the year and its job cost sheet show the following actual results:
Machining department
Assembly department
Direct materials used
$6,000
$4,000
Direct labour cost
$5,000
$36,000
Direct labour hours
500
2,500
Machine hours
4,000
800
Find the total manufacturing costs of Job No. 168.
$
10,000
41,000
Direct materials ($6,000 + $4,000)
Direct labour cost ($5,000 + $36,000)
Manufacturing overheads absorbed:
Machining department (4,000 x $1.4655)
Assembly department (2,500 x $2.846)
Total manufacturing costs
5,862
7,115
63,977
11
21.6.2 Inter-service work done (有交互服務)
There is more than one service department. They provide reciprocal services (交互服務 ) among themselves. In such
circumstances, three common methods are used to re-apportion (再分攤) the overheads (間接費用) of service departments:
1 Direct method
(直接法)
2 Repeated distribution method (reciprocal method)
(重覆分配法)
3 Algebraic method
(代數法)
1 Direct method (直接法)
The overheads of each service department (每個服務部門的間接費用) are directly apportioned (直接分攤) to the
manufacturing departments (生產部門) in the ratio that each manufacturing department shares in the overheads of that
service department (按每一個生產部門所佔用的服務比重). This is the simplest method to apportion the overheads.
However, it ignores reciprocal services performed among service departments (忽略了服務部門互相提供的交互服務).
2 Repeated distribution method (reciprocal method) (重覆分配法)
The overheads of the first service department (第一個服務部門) are re-apportioned (再分攤) to the second service
department (第二個服務部門) and other manufacturing departments (其他生產部門), and then the overheads of the
second service department (第二個服務部門) are re-apportioned (再分攤) to the first service department (第一個服務部門)
and other manufacturing departments (其他生產部門) and so on.
3 Algebraic method (代數法)
The overheads of service departments are re-apportioned (再分攤) with the use of simultaneous equations (聯立方程式).
Example 3
Suppose the service departments provided services for each other while all other things remained the same. The allocated and
apportioned manufacturing overheads (before the re-apportionment of the overheads of the service departments) and the
estimated word done by the service departments for other departments are as follows:
Department
Manufacturing
Total
Service
Machining
Assembly
Stores
Maintenance
$185,000
$382,500
$69,500
$83,000
Estimated work done by service departments for other departments
Stores
50%
35%

15%
Maintenance
60%
30%
10%

1 Direct method
Department
Manufacturing
Allocated and apportioned
manufacturing overheads
Service
Machining
Assembly
Stores
Maintenance
$185,000
$382,500
$69,500
$83,000
Re-apportionment of service departments’ overheads
Stores
$69,500 x 50/85
= $40,882
$69,500 x 35/85
= $28,618
($69,500)
0
Maintenance
$83,000 x 60/90
= $55,333
$83,000 x 30/90
= $27,667
0
($83,000)
$281,215
$438,785
0
0
Total
12
2 Repeated distribution method (reciprocal method)
Department
Manufacturing
Service
Machining
Assembly
Stores
Maintenance
$185,000
$382,500
$69,500
$83,000
$69,500 x 50%
= $34,750
$69,500 x 35%
= $24,325
($69,500)
$69,500 x 15%
= $10,425
$219,750
$406,825
0
$93,425
$93,425 x 60%
= $56,055
$93,425 x 30%
= $28,028
$93,425 x 10%
= $9,342
($93,425)
$275,805
$434,853
$9,342
0
$9,342 x 50%
= $4,671
$9,342 x 35%
= $3,270
($9,342)
$9,342 x 15%
= $1,410
$280,476
$438,123
0
$1,410
$1,410 x 60%
= $841
$1,410 x 30%
= $420
$1,410 x 10%
= $140
($1,410)
$281,317
$438,592
$140
0
$140 x 50% = $70
$140 x 35% = $49
($140)
$140 x 15% = $21
$281,387
$438,592
0
$21
$21 x 60% = $13
$21 x 30% = $6
$21 x 10% = $2
($21)
$281,400
$438,598
$2
0
Stores
$2 x 50% = $1
$2 x 35% = $1
($2)
$2 x 15% = $0
Total
$281,401
$438,599
0
0
Allocated and apportioned
manufacturing overheads
Re-apportionment of service departments’ overheads
Stores
Maintenance
Stores
Maintenance
Stores
Maintenance
3 Algebraic method
Let S be the total overheads of the stores department after being apportioned the overheads of the maintenance department.
Let M be the total overheads of the maintenance department after being apportioned the overheads of the stores department.
The following simultaneous equations are set:
S = $69,500 + 0.1M
----------(1)
M = $83,000 + 0.15S
----------(2)
Put (2) into (1), we have
S = $69,500 + 0.1 ($83,000 + 0.15S)
S = $69,500 + $8,300 + 0.015S
S = $78,985
----------(3)
Put (3) into (2), we have
M = $83,000 + 0.15 ($78,985) = $94,848
Department
Manufacturing
Allocated and apportioned
manufacturing overheads
Service
Machining
Assembly
Stores
Maintenance
$185,000
$382,500
$69,500
$83,000
Re-apportionment of service departments’ overheads
Stores
$78,985 x 50%
= $39,492
$78,985 x 35%
= $27,645
($78,985)
$78,985 x 15%
= $11,848
Maintenance
$94,848 x 60%
= $56,909
$94,848 x 30%
= $28,454
$94,848 x 10%
= $9,485
($94,848)
$281,401
$438,599
0
0
Total
13
It is given that the machine hours of machining department are 200,000 and the direct labour hours of assembly department are
150,000. The absorption base for the manufacturing overheads of the machining department should be machine hours, while the
manufacturing overhead absorption base for the assembly department should be direct labour hours.
The predetermined manufacturing overhead absorption rates for the machining department and the assembly department are
calculated as follows:
Machining department’s manufacturing overhead absorption rate = $281,401 ÷200,000 = $1.407 per machine hour
Assembly department’s manufacturing overhead absorption rate = $438,599 ÷150,000 = $2.924 per direct labour hour
Suppose a job, job No. 168, was completed during the year and its job cost sheet show the following actual results:
Machining department
Assembly department
Direct materials used
$6,000
$4,000
Direct labour cost
$5,000
$36,000
Direct labour hours
500
2,500
Machine hours
4,000
800
The total manufacturing costs of job No. 168 are calculated as follows:
$
10,000
41,000
Direct materials ($6,000 + $4,000)
Direct labour cost ($5,000 + $36,000)
Manufacturing overheads absorbed:
Machining department (4,000 x $1.407)
Assembly department (2,500 x $2.924)
Total manufacturing costs
5,628
7,310
63,938
Classwork 6
1 Ting Tang Co Ltd has two service departments (Service A and Service B) and two production departments (Prod. 1 and Prod. 2).
The direct costs and percentage of service costs consumed by the departments for the month June 2005 are as follows:
Percentage of service consumed
Department
Cost
Service A
Service B
Prod. 1
Prod. 2

Service A
$160,000
20%
45%
35%

Service B
$230,000
15%
35%
50%




Prod. 1
$880,000




Prod. 2
$1,000,000
Calculate the amount of service department costs that should be apportioned to production departments using:
(a) the direct method; and
(b) the reciprocal method.
(a)
Service department
A
B
(b)
Service department
A
B
A
B
A
B
A
B
Cost to be allocated
$160,000
$230,000
Cost to be allocated
$160,000
$262,000
$39,300
$7,860
$1,179
$235
$35
$7
Prod. 1
Prod.2
$160,000 x 45/80 = $90,000
$230,000 x 35/85 = $94,706
$160,000 x 35/80 = $70,000
$230,000 x 50/85 = $135,294
Prod. 1
$72,000
$91,700
$17,685
$2,751
$531
$82
$16
$3
14
Prod.2
$56,000
$131,000
$13,755
$3,930
$413
$118
$12
$4
Service A

$39,300

$1,179

$35


Service B
$32,000

$7,860

$235

$7

2 Jessica Ltd makes trousers. The company has two manufacturing departments: X and Y, and two service departments that
provide support for the manufacturing departments: S1 and S2.
The following manufacturing overheads were budgeted for the year ended 30 June 2011:
X
$120,000
Allocated overheads
Electricity for machines
Salaries of production managers
Depreciation on machines
Factory rent
Y
$140,000
S1
$20,000
S2
$25,000
Total
$305,000
$40,000
$100,000
$60,000
$50,000
Additional information:
Machine hours
No. of employees
Area (square metres)
Machine value
X
20,000
14
250
$210,000
Y
15,000
22
150
$60,000
S1
3,000
8
50
$20,000
S2
2,000
6
50
$10,000
The estimated work done by each service department for other departments are as follows:
X
Y
S1
S2
S1
35%
55%
10%

S2
45%
40%
15%

Compute the total manufacturing overheads allocated and apportioned to each manufacturing department using each of the
following methods:
(a) Direct method
(b) Repeated distribution method
(c) Algebraic method
Answer:
(a)
Basis of apportionment
Allocated overheads
Nil
Electricity for machines
machine hours
Salaries of production managers
Depreciation on machines
No. of employees
machine value
Factory rent
area
Allocated overheads
X
$120,000
Y
$140,000
S1
$20,000
S2
$25,000
Total
$305,000
Electricity for machines
$20,000
$15,000
$3,000
$2,000
$40,000
Salaries of production managers
$28,000
$44,000
$16,000
$12,000
$100,000
Depreciation on machines
$42,000
$12,000
$4,000
$2,000
$60,000
Factory rent
$25,000
$15,000
$5,000
$5,000
$50,000
$235,000
$226,000
$48,000
$46,000
$555,000
Total:
X: $235,000 + [$48,000 × (35 ÷ 90)] + [$46,000 × (45 ÷ 85)] = $278,020
Y: $226,000 + [$48,000 × (55 ÷ 90)] + [$46,000 × (40 ÷ 85)] = $276,980
15
(b) Re-apportionment of service departments’ overheads
Cost to be allocated
X
$235,000
Y
$226,000
S1
$48,000
S2
$46,000
S1
$48,000
$16,800
$26,400
($48,000)
$4,800
S2
$50,800
$22,860
$20,320
$7,620
($50,800)
S1
$7,620
$2,667
$4,191
($7,620)
$762
S2
$762
$343
$305
$114
($762)
S1
$114
$40
$63
($114)
$11
S2
$11
$5
$4
$2
($11)
S1
$2
$1
$1
($2)
0
$277,716
$277,284
0
0
Total:
(c)
Let S1 be the total overheads of the S1 department after being apportioned the overheads of the S2.
Let S2 be the total overheads of the S2 department after being apportioned the overheads of the S1.
S1 = $48,000 + 0.15S2 — (1)
S2 = $46,000 + 0.1S1 — (2)
Put equation (2) into equation (1):
S1 = $48,000 + 0.15($46,000 + 0.1S1)
= $48,000 + $6,900 + 0.015S1
= $55,736 — (3)
Put equation (3) into equation (2):
S2 = $46,000 + (0.1 × $55,736) = $51,574
Allocated and apportioned overheads
X
$235,000
Y
$226,000
S1
$48,000
S2
$46,000
Total
$555,000
Re-apportionment of service departments’ overheads
S1
$55,736
$19,508
$30,654
($55,736)
$5,574
S2
$51,574
$23,208
$20,630
$7,736
($51,574)
$277,716
$277,284
0
0
Total:
16
$555,000
21.7
Cost-plus pricing (成本加成定價法)
Cost-plus pricing means that a fixed mark-up (固定的加成) is added to the total manufacturing costs (總製造成本) to arrive at
(計算出) the selling price (定價).
Classwork 7
1 SBA Ltd manufactures tailor-made furniture for customers. Job Nos. 168 and 169 have been completed. Information on their
costs and levels of activity are as follows:
Job No. 168
Job No. 169
Direct materials issued
$17,260
$19,480
Direct materials returned
$2,110
$1,660
Direct labour hours
860
1,040
Direct labour was paid $20 per hour. Production overheads were absorbed at $8 per direct labour hour. Administrative
overheads were charged on the basis of 20% of total production costs.
(a)
(b)
Calculate the total costs for Job Nos. 168 and 169, respectively.
Determine the selling prices for Job Nos. 168 and 169, respectively, assuming a 50% mark-up is required.
(a)
Direct materials cost
Direct labour cost
Production overheads
Total production costs
Administrative overheads
Total costs
(b)
Selling price
Job No. 168
$17,260  $2,110 = $15,150
860 x $20 = $17,200
860 x $8 = $6,880
$39,230
$39,230 × 20% = $7,846
$47,076
Job No. 169
$19,480 $1,660 = $17,820
1,040 x $20 = $20,800
1,040 x $8 = $8,320
$46,940
$46,940 × 20% = $9,388
$56,328
$47,076 x (1 + 50%) = $70,614
$56,328 x (1 + 50%) = $84,492
2 Chung Tin Manufacturing Co Ltd Specialises in production and supply of sports for kids. It has two production departments and
two service departments. The data provided below has been extracted from the company’s budget for next year.
Cost item
Indirect materials
Indirect labour
Electricity
Factory rent and rates
Machine insurance
Staff welfare
Production department
Cutting
Assembly
($000)
($000)
1,000
800
200
1,300
552
188
Service department
Stores
Maintenance
($000)
($000)
400
600
300
500
140
120
Total
($000)
2,800
2,300
1,000
1,500
500
1,200
The two service cost centres provide reciprocal services for each other and for the production costs centres. Additional data
extracted from the next year’s budget, and information regarding how the service centres work for each other and for the
production centres is also provided below.
Floor area in sq. metres
Machine hours
Direct labour hours
Number of employees
Gross book value of machines ($000)
Stores charged to
Maintenance charged to
Production department
Cutting
Assembly
12,000
13,000
600,000
100,000
10,000
800,000
150
400
5,000
4,000
50%
30%
60%
30%
Service department
Stores
Maintenance
4,000
1,000




20
30
400
600

20%

10%
Total
30,000
700,000
810,000
600
10,000
100%
100%
(a) Calculate the budgeted overhead absorption rates for each production department, after apportionment of the two service
departments using the repeated distribution method, using a machine hour rate for the cutting department and a direct labour
hour rate for the assembly department.
(b) The company is going to quote a price for an order to produce and supply 10,000 pairs of sports shoes. The estimated direct
costs for the order are direct materials of $330,000 and direct labour of $240,000. The order also requires work of 60,000
machine hours in the cutting department and 30,000 direct labour hours in the assembly department. The quoted prices are
calculated to provide a net profit margin of 25% of sales. Calculate the price that should be quoted for the order.
17
(c) If next year 500,000 machine hours were worked in the cutting department, 900,000 direct labour hours were worked in the
assembly department, and the actual overheads for the cutting department and the assembly department were $3,500,000
and $5,600,000. Calculate any under or over absorption of overheads separately for the cutting and the assembly department.
(a)
Allocated and apportioned manufacturing overheads
Cost item
Basis of apportionment
Production department
Cutting
Assembly
($000)
($000)
Indirect materials
Indirect labour
Electricity
Factory rent and rates
Floor area
Machine insurance
Gross book value
Staff welfare
Number of employees
Budgeted overheads before re-apportionment
Service department
Stores Maintenance
($000)
($000)
Total
($000)
2,800
2,300
1,000
1,500
500
1,200
9,300
1,000
200
552
600
250
300
2,902
800
1,300
188
650
200
800
3,938
400
300
140
200
20
40
1,100
600
500
120
50
30
60
1,360
816
618
148
13
3
4,500
408
371
74
7
2
4,800
136
(1,236)
25
(25)
0
0
(1,360)
247
(247)
5
(5)
0
Re-apportionment of service departments’ overheads
Cost item
Cost to be allocated
Maintenance
1,360
Stores
1,236
Maintenance
247
Stores
25
Maintenance
5
Total Budgeted overhead
Cutting department’s budgeted overhead absorption rate = 4,500,000 ÷600,000 = $7.5 per machine hour
Assembly department’s budgeted overhead absorption rate = $4,800,000 ÷800,000 = $6 per direct labour hour
(b) Quoted price:
$
330,000
Direct materials
Direct labour
Manufacturing overheads absorbed:
240,000
450,000
180,000
Cutting department (60,000 x $7.5)
Assembly department (30,000 x $6)
Production costs
1,200,000
Profit margin (25%)
Quoted price (100%)
400,000
1,600,000
(c) Under- or over-absorption of overheads:
Cutting
Assembly
Overheads absorbed
500,000 x $7.5 = $3,750,000
900,000 x $6 = $5,400,000
Overheads incurred
($3,500,000)
($5,600,000)
$250,000
($200,000)
Over-/(Under-) absorption
18
Summary of a job costing system
The process of calculating job cost
19
(HKALE 2005, Paper 2, 1)
(Job Costing)
Welldone Ltd has two production departments, Department A and Department B, manufacturing, Product X and Product Y
respectively. Production departments A and B are served by two production service centres, S1 and S2. The following information
relates to the budget for the year ending 31 December 2005.
(i)
Information relating specifically to Product X and Product Y is given below:
Product X
Product Y
Number of units to be produced and sold
80,000
50,000
Raw materials
$680,000
$600,000
Direct labour hours
40,000
80,000
Labour rate per hour
$20
$18
(ii)
Factory overheads of the production departments and the production service centres are:
Production
Production
Production
departments
service centre
service centre
A&B
S1
S2
$
Rent and rates
480,000
Electricity
100,000
Technical support
70,000
Design and quality control
156,000
Stores
256,000
Depreciation
618,000
Total overheads
$1,680,000
$200,000
$300,000
(iii) Factory overheads of the production departments are allocated to Department A and Department B based on direct labour
hours. On the other hand, the factory overheads of the production service centres are apportioned as follows:
S1
S2
%
%
Production department A
50
60
Production department B
40
30
Production service centre S1
10

Production service centre S2
10

100
100
(a) (i) Calculate the total factory overheads of Department A and Department B respectively. (Note: Use the repeated distribution
method to apportion the factory overheads of production service centres S1 and S2. Correct all amounts to the nearest
dollar.)
(ii) Calculate (to two decimal places) the unit production costs of Product X and Product Y respectively.
Welldone Ltd has been using an absorption rate of administrative and selling expenses at $10 per unit produced and sold. Both
Product X and Product Y are priced at a mark-up of 50% of total costs.
(b) Calculate (to two decimal places) the budgeted unit selling prices of Product X and Product Y respectively.
The cost accountant of Welldone Ltd advised that the budgeted selling prices would differ if factory overheads of the production
departments are absorbed by specific cost drivers. Further information relating to the production departments is as follows:
Production
Production
Departments A
Departments B
Floor are (in square feet)
18,000
14,000
Equipment value
$300,000
$600,000
Number of requests for technical support
400
600
The cost drivers for different items of factory overheads are shown below:
Overheads
Cost driver
Rent and rates
Floor area
Electricity
Floor area
Technical support
Number of requests
Design and quality control
Number of units produced
Stores
Cost of raw materials consumed
Depreciation
Equipment value
(c) (i) Using the above cost drivers for overhead absorption, re-calculate the unit production costs of Product X and Product Y
respectively.
(ii) What are the budgeted unit selling prices of Product X and Product Y if Welldone Ltd is to maintain its mark-up at 50% of
total costs?
20
(a) (i) Overhead absorption rate (Dept A and B): $1,680,000 / (40,000 + 80,000) = $14 per hour
A
B
S1
80,000 x $14
$
$
$
Overhead
560,000
1120,000
200,000
Re-apportionment of service departments’ overheads
S1
100,000
80,000
(200,000)
S2
192,000
96,000
32,000
S1
16,000
12,800
(32,000)
S2
1,920
960
320
S1
160
128
(320)
S2
19
10
3
S1
2
1
(3)
310,101
189,899
870,101
1,309,899
S2
$
300,000
40,000 x $14
Total
$
2,180,000
20,000
(320,000)
3,200
(3,200)
32
(32)
0
(ii)
Direct materials
Direct wages
Factory overhead (a) (i)
Total cost
Product X
$
680,000
800,000 80,000 x $18
870,101
2350,101
40,000 x $20
Total number of units produced
Production cost per unit
80,000
$29.38
Product Y
$
600,000
1,440,000
1,309,899
3,349,899
50,000
$67.00
(b)
Production cost per unit
Administrative expenses
Total cost per unit
Mark-up 50%
Budgeted unit selling price
Product X
$
29.38
10.00
39.38
19.96
59.07
Product Y
$
$67.00
10.00
77.00
38.5
115.50
(c) (i)
Direct materials
Direct wages
Factory overhead (workings)
Overhead of S1 and S2
Total cost
Product X
$
680,000
800,000
792,250
310,101
2,582,351
Product Y
$
600,000
1,440,000
887,750
189,899
3,117,649
80,000
$32.28
50,000
$62.35
Total number of units produced
Production cost per unit
Workings:
Total
$
480,000
100,000
70,000
156,000
256,000
618,000
1,680,000
Rent and rates (18,000 : 14,000)
Electricity (18,000 : 14,000)
Technical support (400 : 600)
Design and quality control (80,000 : 50,000)
Stores (680,000 : 600,000)
Depreciation (300,000 : 600,000)
21
Product X
$
270,000
56,250
28,000
96,000
136,000
206,000
792,250
Product Y
$
210,000
43,750
42,000
60,000
120,000
412,000
887,750
(ii)
Production cost per unit
Administrative expenses
Total cost per unit
Mark-up 50%
Budgeted unit selling price
Product X
$
32.28
10.00
42.28
21.14
63.42
Product Y
$
62.35
10.00
72.35
36.18
108.53
3 Crimson Ltd makes car parts and has two production departments, M and N. The company has chosen direct labour hours as
the overhead absorption base for Department M and machine hours as the overhead absorption base for Department N.
(a) (i) Rent and rates overhead absorption of Product X = $480,000 x 18,000/32,000 = $270,000
Budget information at the beginning of the financial year ended 31 December 2013 is as follows:
Rent and rates overhead absorption ofDepartment
Product Y =M$480,000 x 14,000/32,000
Department N= $210,000
Direct
labour overhead absorption of Product$6,000,000
$1,800,000
Electricity
X = $100,000 x 18,000/32,000
= $56,250
Manufacturing
overheads
$7,155,000
$11,225,000
Electricity overhead absorption of Product Y = $100,000 x 14,000/32,000 = $43,750
Direct labour hours
75,000 hours
28,000 hours
Technical
support overhead absorption of
Product
X = $70,000 x 400/1,000
= $28,000
Machine
hours
30,000
hours
150,000 hours
Technical support overhead absorption of Product Y = $70,000 x 600/1,000 = $42,000
For the month of September 2013, the job cost records of Job No. S15 showed the following information:
Design and quality control overhead absorption
ofMProduct X = $156,000
x 80,000/130,000
= $96,000
Department
Department
N
Direct
materials
consumed
$10,000
$50,000
Design
and quality
control overhead absorption
of Product Y = $156,000
x 50,000/130,000 = $60,000
Direct labour hours
50 hours
30 hours
Stores overhead absorption of Product X = $256,000
x 680,000/1,280,000
= $136,000
Machine hours
10 hours
120 hours
Stores overhead absorption of Product Y = $256,000 x 600,000/1,280,000 = $120,000
At the end of the financial year, the company ascertained that the actual manufacturing overheads incurred in Department M
Depreciation
absorption
Product X =respectively.
$618,000 x 300,000/900,000 = $206,000
and
Departmentoverhead
N were $7,500,000
andof
$10,000,000,
Depreciation overhead absorption of Product Y = $618,000 x 600,000/900,000 = $412,000
(a) Calculate the predetermined overhead absorption rates for the production departments.
(b)
(c)
Calculate the total manufacturing overheads to be charged to Job No. S15 in September 2013.
Calculate the total manufacturing overheads to be absorbed into a job which incurred 48 direct labour hours and 15
machine hours in Department M, as well as 5 direct labour hours and 25 machine hours in Department N.
(a)
Predetermined overhead absorption rates:
Department M = Total budgeted manufacturing overheads  Total budgeted direct labour hours
= $7,155,000  75,000
= $95.4 per direct labour hour
Department N = Total budgeted manufacturing overheads  Total budgeted machine hours
= $11,225,000  150,000
= $74.83 per machine hour
(b) Manufacturing overheads to be charged to Job No. S15:
$
4,770
Department M (50  $95.4)
Department N (120  $74.83)
8,979.6
13,749.6
(c) Manufacturing overheads to be absorbed into the job::
Department M (48  $95.4)
$
4,579.2
Department N (25  $74.83)
1,870.75
6,449.95
22