Reference no: EM132182082
Question - Job Order Costing for Modern Furniture
Modern Furniture Company makes chairs and uses job order costing and applies manufacturing overheads to individual jobs by using predetermined overhead rates. Modern has two departments, assembly and finishing. In assembly department, overhead is applied based on machine hours, and in finishing department, based on direct labor hours. At the beginning of year 2018, Modern Company's management made the following budget estimates as a step toward determining the overhead application rates:
Assembly department Finishing department
Direct labor $105,000 $75,000
Manufacturing overhead 135,000 103,000
Machine-hours 4,500 475
Direct labor hours 7,000 6,250
Production of 500 chairs (job no. 555), was started in the first of January and completed three weeks later. The cost records for this job no. (555) show the following information:
Job No. 555 (500 Chairs)
Assembly department Finishing department
Cost of materials used on job $1,700 $1,125
Direct labor cost $2,025 $1,800
Direct labor hours 135 150
Machine-hours 62.5 25
Required -
(1) Compute the overhead rate that should be used for each department in applying overhead costs to job no. 555.
(2) What is the total cost of job No. 555, and what is the unit cost of the product manufactured on this production order?
(3) Discuss in brief some of the advantages and disadvantages of Activity Based Costing Method?