Manufacturing support costs have to be allocated as per their cost driver.. It i
ID: 2387393 • Letter: M
Question
Manufacturing support costs have to be allocated as per their cost driver.. It is mentioned in the question that machining department uses machine hours to allocate manufacturing support cost whereas finishing department uses direct labor cost..So, for machining department, cost driver rate would be Total manufacturing support cost/Total machine hours i.e. $350,000/14,000 = $25 per machine hour.
For finishing department, cost driver rate would be Total manufacturing support cost/total direct labor cost i.e. $280,000/$350,000 = $0.8 per $ 1 of direct labor cost
job 101:
machining dept finishing dept
direct mtls cost 8000 1400
direct labor cost 250 800
direct labor hours 7 35
machine hours 50 6
determine total cost for job 101
Explanation / Answer
a) Manufacturing support costs have to be allocated as per their cost driver.. It is mentioned in the question that machining department uses machine hours to allocate manufacturing support cost whereas finishing department uses direct labor cost.. So, for machining department, cost driver rate would be Total manufacturing support cost/Total machine hours i.e. $350,000/14,000 = $25 per machine hour. For finishing department, cost driver rate would be Total manufacturing support cost/total direct labor cost i.e. $280,000/$350,000 = $0.8 per $ 1 of direct labor cost b) Machining department Direct material cost = $8,000 Direct labor cost = $ 250 Manufacturing support costs = $1,250 ($25 per machine hour multiply by 50 machine hours) $9,500 Finishing department Direct material cost = $1,400 Direct labor cost = $ 800 Manufacturing support cost = $ 640 ($ 0.8 multiply by $800) $2,840
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