1.
A company manufactures small assemblies to order and has the following budgeted overheads
for the year, based on normal activity levels.
Department Budgeted Overheads Overhead Absorption Base
D
Blanking 18000 1500 labour hours
Machining 43000 2500 machine hours
Welding 20000 1800 labour hours
Assembly 15000 1000 labour hours
Selling and Administrative overheads are 20% of Factory cost.
An order for 250 assemblies’ type X128 incurred the following cost:
Materials D3107
Labor: 128 hours Blanking Shop at D5.25/hour
452 hours Machining Shop at D5.50/hour
90 hours Welding Shop at D5.25/hour
175 hours Assembly Shop at D4.80/hour
D 525 was paid for the hire of special X-ray equipment for testing the welds. The time booking in
the machine shop was 643 machine hours.
Calculate the total cost of the order and the unit cost.
2. A factory with three departments uses a single production overhead absorption rate
expressed as a percentage of direct wages cost. It has been suggested that departmental
overhead absorption rate would result in a more accurate job costs. Set out below is the
budgeted data for previous period, together with information relating to job No.657.
Hours in thousand
Direct wages direct labour machine production
$000’s overhead $000’s
Budget:
Department: A 25 10 40 120
B 100 50 10 30
C 25 25 - 75
150 85 50 225
During this period job No.657 incurred the actual cost and actual times in the department
as shown below:
Direct wages direct direct machine
material wages labour hour
$000’s $000’s hour
000’s 000’s
Budget:
Department: A 120 100 20 40
B 60 60 40 10
C 10 10 10 -
After adding production overhead to prime cost, one third is added to the production cost
for gross profit. This assumes that a reasonable profit is earned after deducting
administration, selling and distribution costs.
You are to prepare the job cost sheet for job No.657
3. ABC Electronic Company manufactures a variety of electronic components. In May
2003, the company received an invitation from XYZ Inc. to bid on an order of 1000 units
of component ICB371 that must be delivered by August 16, 2003. The following are
standard (estimated) requirements and prices for 1000 units of ICB371:
Quantity Price
Direct material 2000 units $10 per unit
Direct Labour 1000 hours $10 per hour
The cost of support resources is assigned to jobs based on direct labour hours. The
estimated support costs for 2003 are $300000 and the estimated direct labour hours are
50000. ABC has a policy to add a 20% mark-up to estimated job costs to arrive at the bid
price.
a) Prepare a job bid sheet
b) Assume that XYZ Inc. accepted ABC’s bid. After producing and delivering the 1000
units of ICB371 to XYZ on August 4, ABC’s management accountants compiled the
following information about this job:
Quantity Price
Direct material 2100 units $9.75 per unit
Direct Labour 1000 hours $11 per hour
Prepare a job cost sheet to record the actual cost incurred on this job and determine
the actual profit.
4. Portland Electronics, Inc., delivered 1000 custom-designed computer monitors on
February 10 to its customer Video Shack; the monitors had been ordered in January 1.
The following cost information was compiled in connection with this order:
Direct material used
Part A327: 1 unit costing $60 per monitor
Part B149: 1 unit costing 130 per monitor
Direct labour used
Assembly: 6 hours per monitor at rate of $10 per hour
Inspection: 1 hour per monitor at rate of $12 per hour
In addition, manufacturing support costs are applied to the job at the rate of $5 per direct
labour hour. The selling price for each monitor is $350.
You are required:
a. Prepare a job cost sheet for this job.
b. Determine the cost per monitor.
c. Determine the profit per monitor
5. ACC ltd is considering putting in a bid for a job coded ‘Zeron’ that would have the following the
cost:
Matrials:
11 000 kilos plastic at $4 per kilo
8 000 kilos ink at $2.50 per kilo
Labour
Dept A 2 500 hours at $4 per hour
Dept B 1 600 hours at $5 per hour
Production overheads
The policy is to use predetermined overhead rates for each department based upon:
Dept A: per labour hour
Dept B: per % of labour cost
Budgeted information for the year under review was:
Direct material $763 000
Labour Dept A 38 000 hours at $4 per hour
Labour Dept B 25 000 hours at $5 per hour
Production overhead Dept A $ 760 000
Production overhead Dept B $750 000
Administrative overhead $510 000 and to be recovered on the basis of production cost.
You are told that usual company policy is to take a profit of 40% on cost.
You are required to prepare a job bid sheet for ABC Ltd to determine the bid price of the job
‘Zeron’.
