Lowell Company uses a normal job-costing system at its Minneapolis plant. The pl
ID: 2336418 • Letter: L
Question
Lowell Company uses a normal job-costing system at its Minneapolis plant. The plant has a machining department and an assembly department. Its job-costing system has two direct-cost categories (direct materials and direct manufacturing labor) and two manufacturing overhead cost pools (the machining departmentoverhead, allocated to jobs based on actual machine-hours, and the assembly department overhead, allocated to jobs based on actual direct manufacturing laborcosts). The 2017 budget for the plant is as follows:
Machining Department
Assembly Department
Manufacturing overhead
Machining $1,800,000
Assembly $3,900,000
Direct manufacturing labor costs
Machining $1,000,000
Assembly $3,000,000
Direct manufacturing labor-hours
Machining 160,000
Assembly 200,000
Machine-hours
Machining 60,000
Assembly 200,000
1. Identify the components of the overview diagram of Lowell's job-costing system. Compute the budgeted manufacturing overhead rate for each department.
2. During February, the job-cost record for Job 494 contained the following:
Machining Department
Assembly Department
Direct material used
$48,000
$78,000
Direct manufacturing labor costs
$18,000
$20,000
Direct manufacturing labor-hours
1,400
1,500
Machine-hours
2,600
1,600
Compute the total manufacturing overhead costs allocated to Job 494.
3. At the end of 2017, the actual manufacturing overhead costs were $2,100,000
in machining and $5,300,000 in assembly. Assume that 66,000 actual machine-hours were used in machining and that actual direct manufacturing labor costs in assembly were $3,300,000.
Compute the over- or underallocated manufacturing overhead for each department.
Machining Department
Assembly Department
Direct material used
$48,000
$78,000
Direct manufacturing labor costs
$18,000
$20,000
Direct manufacturing labor-hours
1,400
1,500
Machine-hours
2,600
1,600
Explanation / Answer
1) Machining Department Manufacturing Overhead INDIRECT COST POOL Assembly Department Manufacturing Overhead Machine-Hours COST ALLOCATION BASE Direct Manuf.Labor Cost Indirect Costs COST OBJECT PRODUCT Direct Costs Direct Materials DIRECT COST Direct Manufacturing Labor Budgeted manufacturing overhead Machining overhead = $1,800,000/60,000 MH $30.00 per machine-hour Assembly overhead = 3900000/3000000 DLH 130.00% of direct manuf. labor cost 2) Machining department = 2,600 hours x $30 $78,000.00 Assembly department =130% x 20000 $26,000.00 Total manufacturing overhead allocated to Job 494 $104,000.00 3) Machining Assembly Actual manufacturing overhead $2,100,000.00 $5,300,000.00 Manufacturing overhead allocated (66000 x $30); 3300000 x 130% $1,980,000.00 $4,290,000.00 Underallocated (Overallocated) $120,000.00 $1,010,000.00
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