Extra Questions

Topic 4
JOB COSTING EXTRA QUESTIONS
Question 1
Chiptuning Ltd has identified its budgeted production overhead costs categorized by
cost pools under activity based costing for next year operation.

Manufacturing Estimated overhead Budgeted

activity by cost pools Cost driver volume for cost
$ used driver
Setups 90,000 No. of setups 400
Ordering 50,000 No. of orders 4,000
Maintenance 150,000 Machine hours 25,000
Power 30,000 Kilowatt hours 75,000

Currently, Chiptuning Ltd still relied on a traditional costing method to estimate the
production cost for jobs. The traditional costing method employed was based on
single plant-wide approach, where its overhead rate is applied based upon budgeted
direct labour hours. The company projected their labourers will work 5,000 hours
next year.

The estimates for Job 715 are as follows:

Direct materials @ $20 per kg 60 kgs
Direct labour @ $22.50 per hour 40 hours
No. of units to be produced for this job 250 units
Number of orders 10
Number of setups 2
Number of machine hours 50
Number of kilowatt hours 60

Required:
a) Determine the unit cost for Job 715 under the current costing system.
b) Compute the unit cost for Job 715 under the Activity Based Costing (ABC)
method.
 Extra Questions

JOB COSTING EXTRA QUESTIONS

Question 1
Nue Prime Ltd is a manufacturing company and has two production centre
namely machining and finishing departments. The budgeted costs for the
month of August are:

Total activity driver

Production Overhead Direct
department costs labour Machine
$ Hrs Hrs
Machining 720,000 64,000 20,000
Finishing 930,000 186,000 7,400

Job WT273 actual data for month of August are:

Direct Direct
Production materials labour
department used costs Machine
$ $ Hrs
Machining 13,910 8,400 520
Finishing 2,430 11,290 130

Labourers are paid $20 for an hour worked.

Required:

(a) Calculate the company plant wide overhead applied rate if overhead
is applied based on direct labour hour basis.

(b) Compute the cost for Job WT273 using part (a)’s basis of overhead
allocation.

(c) Calculate departmental overhead applied rates, assuming that cost

driver for Machine and Finishing departments are machine hour and
labour hour respectively.

(d) Determine the cost for Job WT273 using departmental overhead
rates.