FINANCIAL ACCOUNTING
10th Edition
ISBN: 9781259964947
Author: Libby
Publisher: MCG
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Rally Baling Sdn Bhd (RBSB) makes custom made kitchen cabinet. The company uses a
|
|
Department |
||
|
Costs |
Moulding |
Assembling |
Finishing |
|
Direct labor hours |
10,000 |
40,000 |
8,000 |
|
Machine hours |
50,000 |
10,000 |
10,000 |
|
Direct labor costs |
RM50,000 |
RM80,000 |
RM50,000 |
|
Direct materials costs |
RM120,000 |
RM165,000 |
RM70,000 |
|
Manufacturing overhead costs |
RM180,000 |
RM220,000 |
RM20,000 |
Job No. 120 was started on 1 January 2020 and completed on 31 January 2020. This job was ordered by Wan Kemara School in Changlun, Kedah. RBSB’s cost records shown the following information on the Job No. 120:
|
|
Department |
||
|
Costs |
Moulding |
Assembling |
Finishing |
|
Direct labor hours |
200 |
700 |
800 |
|
Machine hours |
100 |
1,200 |
1,000 |
|
Direct labor costs |
RM2,000 |
RM12,500 |
RM5,000 |
|
Direct materials costs |
RM5,000 |
RM16,000 |
RM2,500 |
|
Manufacturing overhead costs |
RM4,000 |
RM22,000 |
RM12,000 |
Recently, you as the plant manager have heard that departmental overhead rates can offer significantly better cost assignments than a plantwide rate can offer. In implementing this new overhead rate base, the predetermined overhead rate in the Moulding Department will be based on direct labor hours; Assembling Department will be based on machine hours; and the rate in the Finishing Department will be based on direct labor costs.
REQUIRED:
(a) If RBSB uses a plantwide overhead rate:
(i) Calculate the predetermined overhead rate for the year 2020.
(ii) Determine the total of manufacturing overhead cost applied to Job 120.
(b) If RBSB uses departmental overhead rate:
(i) Calculate the predetermined overhead rate for each department for the year 2020.
(ii) Determine the total of manufacturing overhead cost applied to Job 120.
(c) Between the plantwide rate in part (a) (ii) and the departmental rate in part (b) (ii) above, which manufacturing overhead rate would you recommend to be applied for Job 120? Justify your answer.
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Step 1: Predetermined overhead rate (by using the overhead cost under plant-wide overhead cost)
VIEW Step 2: total manufacturing overhead cost applied to job 120 (from step-1 overhead rates)
VIEW Step 3: Predetermined overhead rate (by using the overhead cost under departmental overhead cost)
VIEW Step 4: total manufacturing overhead cost applied to job 120 (from step-3 overhead rates)
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