Concept explainers
Cost Flows
Consider the following independent jobs. Overhead is applied in Department 1 at the rate of $6 per direct labor hour. Overhead is applied in Department 2 at the rate of $8 per machine hour.
Direct labor wages average $10 per hour in each department.
Required:
Fill in the missing data for each job.
Complete the table by finding the missing amounts.
Explanation of Solution
Cost Flow:
A method which describes the way of accounting costs from the time of their occurrence to the time of their recognition as an expense on the income statement is known as cost flow.
Job 213 | Job 214 | Job 217 | Job 225 | |
Total sales revenue | $1,200 | $4,375 | $5,600 | $1,150 |
Price per unit | $12 | $8.78 | $14 | $5 |
Materials used in production | $365 | $1,453 | $488 | $207 |
Department 1, direct labor cost | $150 | $700 | $2,000 | $230 |
Department 1, machine hours | 15 | 35 | 50 | 12 |
Department 2, direct labor cost | $50 | $100 | $100 | $0 |
Department 2, machine hours | 25 | 50 | 20 | 0 |
Department 1, overhead applied | $90 | $420 | $1,200 | $138 |
Department 2, overhead applied | $200 | $400 | $160 | $0 |
Total manufacturing cost | $855 | $3,073 | $3,948 | $575 |
Number of units | 100 | 350 | 400 | 230 |
Unit cost | $8.55 | $12.50 | $9.87 | $2.50 |
Table (1)
Working Note:
1. Job 213:
Calculation of number of units
Calculation of total sales revenue:
Calculation of department 1, direct labor hours:
Calculation of department 1, direct labor cost:
Calculation of department 2, overhead applied:
2. Job 214:
Calculation of price per unit:
Calculation of department 1, direct labor hours:
Calculation of department 1, overhead applied:
Calculation of material used:
Calculation of unit cost:
3. Job 217:
Calculation of department 2, machine hours:
Calculation of manufacturing cost:
Calculation of department 2, labor cost:
4. Job 225:
Calculation of number of units:
Calculation of unit cost:
Calculation of department 2, machine hours:
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Chapter 4 Solutions
Managerial Accounting: The Cornerstone of Business Decision-Making
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