4-20 and 4-31 Solutions - University of Washington ACCTG 311

(20-30 min.) Job costing, accounting for manufacturing overhead, budgeted rates.
The Lynn 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 department overhead, allocated to jobs based on actual machine-hours,
and the assembly department overhead, allocated to jobs based on actual direct manufacturing
labor costs). The 2014 budget for the plant is as follows:
Machining Department Assembly Department
Manufacturing overhead $1,800,000 $3,600,000
Direct manufacturing labor costs $1,400,000 $2,000,000
Direct manufacturing labor-hours 100,000 200,000
Machine-hours 50,000 200,000

Required:
1. Present an overview diagram of Lynn’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 materials used $45,000 $70,000
Direct manufacturing labor costs $14,000 $15,000
Direct manufacturing labor-hours 1,000 1,500
Machine-hours 2,000 1,000

Compute the total manufacturing overhead costs allocated to Job 494.
3. At the end of 2014, the actual manufacturing overhead costs were $2,100,000 in machining
and $3,700,000 in assembly. Assume that 55,000 actual machine-hours were used in
machining and that actual direct manufacturing labor costs in assembly were $2,200,000.
Compute the over- or underallocated manufacturing overhead for each department.

SOLUTION

1. An overview of the product costing system is




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, INDIRECT
COST
POOL
 Machining Department
Manufacturing Overhead
Assembly Department
Manufacturing Overhead




COST
ALLOCATION
BASE
 Machine­Hours Direct Manuf.
Labor Cost




COST OBJECT:
PRODUCT  Indirect Costs
Direct Costs




DIRECT
COST
 Direct
Materials
Direct
Manufacturing
Labor



Budgeted manufacturing overhead divided by allocation base:

Machining Department overhead: = $36 per machine-hour
$1,800,000
50,000
Assembly Department overhead: = 180% of direct manuf. labor costs
$3,600,000
$2,000,000

2. Machining department overhead allocated, 2,000 hours  $36 $72,000
Assembly department overhead allocated, 180%  $15,000 27,000
Total manufacturing overhead allocated to Job 494 $99,000

3. Machining Dept. Assembly Dept.
Actual manufacturing overhead $2,100,000 $ 3,700,000
Manufacturing overhead allocated,
$36  55,000 machine-hours 1,980,000 —
180%  $2,200,000 — 3,960,000
Underallocated (Overallocated) $ 120,000 $ (260,000)


(2030 min) Job costing, accounting for manufacturing overhead, budgeted rates.

The Pisano Company uses a job-costing system at its Dover, Delaware, plant. The plant has a
machining department and a finishing department. Pisano uses normal costing with two direct-
cost categories (direct materials and direct manufacturing labor) and two manufacturing
overhead cost pools (the machining department with machine- hours as the allocation base and


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