Job 118 footed on 2nd January and finished on 12th January. The company cost records shows the following information concerning the job?
Machining & Assembly
Direct material: A RM17,500 & RM12.250
Direct material: B RM19,000 & RM13,720
Direct labour cost : RM15,500 & RM7,000
Direct expenses Special machine used : RM3,000
Activity : 2,100 machine hours & 1,500 direct labour hours
Selling and distribution expenses, administration expenses and financial expenses are 30%, 20% and 15% of the total production cost.
b. Calculate the total overhead cost applied to Job 118
C. Prepare job order cost sheet to calculate the total cost for Job 118.
d. Calculate over or under absorbed overhead for each department for the year.
b. Total overhead cost applied to Job 118 can be calculated as follows:
Total Direct Material Cost = (RM17,500 + RM12,250) + (RM19,000 + RM13,720) = RM62,470
Total Direct Labour Cost = RM15,500 + RM7,000 = RM22,500
Total Direct Cost = Total Direct Material Cost + Total Direct Labour Cost = RM62,470 + RM22,500 = RM84,970
Total Machine Hours = 2,100
Total Direct Labour Hours = 1,500
Total Activity = Total Machine Hours + Total Direct Labour Hours = 2,100 + 1,500 = 3,600
Overhead Rate = Total Overhead Cost / Total Activity
Total Overhead Cost = (RM3,000 * 1.30) + (RM3,000 * 1.20) + (RM3,000 * 1.15) = RM3,900 + RM3,600 + RM3,450 = RM10,950
Overhead Rate = RM10,950 / 3,600 = RM3.04 per unit of activity
Total Overhead Cost Applied to Job 118 = Overhead Rate * Total Activity
Total Overhead Cost Applied to Job 118 = RM3.04 * 3,600 = RM10,944
c. Job Order Cost Sheet for Job 118:
Direct Material A: RM17,500
Direct Material B: RM19,000
Direct Labour: RM22,500
Direct Expenses: RM3,000
Overhead Cost Applied: RM10,944
Total Cost for Job 118 = Direct Material Cost + Direct Labour Cost + Direct Expenses + Overhead Cost Applied
Total Cost for Job 118 = RM17,500 + RM19,000 + RM22,500 + RM3,000 + RM10,944 = RM72,944
d. To calculate over or under absorbed overhead for each department for the year, you would need to compare the actual overhead costs incurred by each department with the overhead costs applied to the jobs completed in those departments. If the actual overhead costs are more than the overhead costs applied, there is an under-absorption of overhead. If the actual overhead costs are less than the overhead costs applied, there is an over-absorption of overhead.