Sem2

BPC32603 2011-2012

BPC32603
JOB COSTING EXAMPLES –Q5

Q5. The following information is related to produce product X and Y

Job No 2008-Product X Job No 2009-Product Y

Department Budgeted Cost Driver or OH Budgeted Cost Driver or OH
Overhead allocation base Overhead allocation base
(RM) (RM)
Cutting 30,000 1,200 labour hours 25,200 1,050 labour hours
Machining 15,000 2,500 machine hours 20,000 4,000 machine hours
Moulding 12,000 1,200 labour hours 18,000 1000 labour hours
Assembly 35,000 1,000 labour hours 15,000 500 labour hours

Direct Labor cost and Direct hour spent for Each Department for Product X and Y is as below:

Job No 2008-Product X (250 units) Job No 2009-Product Y (150 units)

Department Actual DL Actual Direct Hours Actual DL Actual Direct Hours
Costs (RM) Costs (RM)
Cutting 14,400 500 DLH 1,800 300 DLH
Machining 1,800 300 DMH 4,500 600 DMH
Moulding 3,500 350 DLH 2,000 100 DLH
Assembly 3,500 450 DLH 1,500 200 DLH

Actual Direct Material for product X = RM 20,000 Y = RM 22,000

a) Calculate cost and unit cost for Job 2008 and Job 2009. Use departmental direct hours as
cost driver.
b) Calculate as in (a) by using plant-wide predetermine overhead rate either use DMH or DLH

1
 Sem2
BPC32603 2011-2012

SUSGESTED SOLUTIONS

Q5. Answer

a) Use departmental direct l hour as cost driver

Step 1, find POR

Job No 2008-Product X Job No 2009-Product Y

Department POR POR
Cutting RM30,000/ RM25,200/
1,200 labour hours =RM25 1,050 labour hours=RM24
Machining RM15,000/ RM20,000/
2,500 machine hours=RM6 4,000 machine hours=RM5
Moulding RM12,000/ RM18,000/
1,200 labour hours=RM10 1,000 labour hours=RM18
Assembly RM35,000/ RM15,000/
1,000 labour hours=RM35 500 labour hours=RM30

Overhead Costs:
Job No 2008-Product X (250 units) Job No 2009-Product Y (150 units)
Department OH costs OH costs
Cutting 500 DLH x RM25=RM12,500 300 DLH x RM24 = 7,200
Machining 300 DMH x RM6 = RM1,800 600 DMH x RM5 =RM3,000
Moulding 350 DLH x RM10 = RM3,500 100 DLH x RM18=RM1,800
Assembly 450 DLH XRM35 =RM15,750 200 DLH xRM30=RM6,000
Total OH RM33,550 RM18,000

Direct Labour Costs:

Job No 2008-Product X (250 units) Job No 2009-Product Y (150 units)
Department Actual DL Actual Direct Hours Actual DL Actual Direct Hours
Costs (RM) Costs (RM)
Cutting 14,400 500 DLH 1,800 300 DLH
Machining 1,800 300 DMH 4,500 600 DMH
Moulding 3,500 350 DLH 2,000 100 DLH
Assembly 3,500 450 DLH 1,500 200 DLH
Total DLH costs RM23,200 RM 9,800

2
 Sem2
BPC32603 2011-2012

JOB 2008 JOB 2009

Direct Materials costs : RM 20,000 RM22,000

Direct Labor RM23,200 RM9,800
Total OH RM 33,550 RM18,000
Total Cost Job 2008 = RM 76,750 Job 2009: =RM 49,800
Cost/unit X =RM 307 Cost/unit Y=RM332

b) Assuming POR based on plant-wide based on DLH

JOB 2008:

Total budgeted DLH Job No 2008 = (1200+1200+1000) = 3,400 DLH

Total budgeted OH is RM 92,000
POR based on DLH = RM92,000 / 3,400 = RM27.06

Note : department machining ( is using DMH overhead for this dpt is is also counted for
calculation of POR as well )

Total OH absorbed for job 2008 =

RM27.06 x total DLH Job 2008 =
RM27.06 x 1300 DLH = 35,178.
So, Total costs for job 2008 =
Material RM20,000 + Direct Labor RM23,200 + OH RM35,178=RM78,378
Unit cost = 313.51

JOB 2008:

Total budgeted DMH Job No 2008 = 2,500 DMH

Total budgeted OH is RM 92,000
POR based on DMH = RM92,000 / 2,500 = RM36.8

Note : other departments are not using DMH , overhead for these dpt’s is is also counted
for calculation of POR as well )

Total OH absorbed for job 2008 =

RM36.8 x total DMH Job 2008 =
RM36.8 x 300 DMH = 11,040
So, Total costs for job 2008 =
Material RM20,000 + Direct Labor RM23,200 + OH RM11,040=RM54,240
Unit cost = 216.96.

3
 Sem2
BPC32603 2011-2012

Lesson learned: ****

cost per unit and total job cost is vary based on different method of cost driver used.
Therefore the choice on cost driver is based on the most significant influent of type of cost
driver which directly influence the activities and cost of production. Thus, this is your duty as
factory manager or production manager to advice management on the choice of cost driver.
Looking to Job 2008, most activities are influence by the use of DLH compared to DMH
which only one department involved. Thus DMH is more appropriate if plant-wide is use as
to determine POR. However if detail activity of each department and OH can be easily
ascertained, the recommended method to calculate is POR by department instead of POR
plan wide. This is due to the OH allocation is more detail and meaningful.

You may calculate for Job 2009 based on the example above.