Job Costing Problems For Practice - CMA
Job Costing Problems For Practice - CMA
Job Costing Problems For Practice - CMA
work begins:
(2) materials requisition record, a document that contains
information about the cost of direct materials used on a specific
job and in a specific department; and
(3) labor-time record, a document that contains information
about the labor time used on a specific job and in a specific
department.
The main concern with the source documents of job cost records
is the accuracy of the records. Problems occurring in this area
include incorrect recording of quantity or rupee
amounts,
materials recorded on one job being borrowed and used on
other jobs, and erroneous job numbers being assigned to
materials or labor inputs.
Actual costing and normal costing differ in their use of actual or
budgeted indirect cost rates:
Actual
Normal
Budgeted
Direct
Actual
Actual
Budgeted
Indirect
Actual
Budgeted
Budgeted
Job Costing
Oil Process
Software
Job Costing
Costing
Cold
Drink Process
Refinery
Custom
Job Costing
Producer
Movie Studio
Furniture
Costing
Manufacturer
Tyre
Process
Manufacturin
g
Text
Law Firm
Job Costing
Costing
Air
Publisher
Manufacturin
Pharmaceutic Process
g
Management
al Company
Costing
Consulting
Job Costing
Firm
Biscuit Mfg
Advertising
Costing
Process
Job Costing
Process
Agency
Costing/
Flour Mill
Process
Catering
Hybrid
Job Costing
Paint
Costing
Process
Service
Paper Mill
Process
Repair
Costing
Job Costing
Manufacturer Costing
Hospital
Job Costing
Garage
Problem : Paras Products uses a job-costing system with two
direct-cost categories (direct materials and direct manufacturing
labor) and one manufacturing overhead cost pool. Paras allocates
manufacturing overhead costs using direct manufacturing labor
costs. Paras provides the following information:
Particulars
Budget for
Year 1
Actual results
for Year 1
Rs 7,50,000
5,00,000
Rs 7,25,000
4,90,000
8,75,000
9,31,000
Required
1. Compute the actual and budgeted manufacturing overhead
rates for Year 1.
2. During March, the job-cost record for Job 626 contained the
following information:
a. Direct materials used
Rs 20,000
Rs 15,000
Compute the cost of Job 626 using (a) actual costing and (b)
normal-costing.
3. At the end of Year 1, compute the under or overallocated
manufacturing overhead under normal costing. Why is there
no under or overallocated overhead under actual costing?
Solution
1. Actual manufacturing overhead rate = Actual manufacturing
overhead costs/Actual direct manufacturing labor costs
= Rs 9,31,000/Rs 4,90,000 = 1.9 or 190%
Budgeted
manufacturing
manufacturing
overhead
overhead
rate
costs/Budgeted
Budgeted
direct
manufacturing
15,000
15,000
28,500
26,250
63,500
61,250
overhead
allocated
under
normal
manufacturing
overhead
Actual
University
Software
Show
Company
for
Business
Engineering
School
Room Coaching
Selling College
Tractors
College
Call Centre
like
FITJEE
manufacturing
overhead
cost
pools
(the
Machining
Department overhead, allocated to jobs based on actual machinehours, and the Assembly Department overhead, allocated to jobs
based on actual direct manufacturing labor cost). The Year 1
budget for the plant is:
Particulars
Manufacturing
overhead
Direct manufacturing
labor cost
Direct manufacturing
labor-hours
Machine-hours
Machining
Department
Rs 36,00,000
Assembly
Department
Rs 72,00,000
28,00,000
40,00,000
2,00,000
4,00,000
1,00,000
4,00,000
Required
1. Present an overview diagram of Marutis job-costing system.
Compute the budgeted manufacturing over-head rate for
each department.
COST
ALLOCATION
BASE
COST OBJECT:
PRODUCT
DIRECT
Machining Department
Manufacturing Overhead
Assembly Department
Manufacturing Overhead
Machine Hours
Direct Manufacturing
Labor Cost
Indirect Costs
Direct Costs
Budgeted
COST manufacturing overhead divided by allocation base:
Machining overhead: Rs 36,00,000/1,00,000
= Rs 36 per
Direct Manufacturing Labor
Direct
machine hour
Materials
Assembly overhead: Rs 72,00,000/40,00,000 = 180 % direct
manufacturing labor costs
2.
Rs 1,44,000
54,000
1,98,000
Machin Assembl
ing
y
42,00,0 74,00,000
00
39,60,0
00
79,20,000
2,40,00
(Rs
0 5,20,000)
20,000 hours
10,000
4,000
6,000
Required
1. Compute the budgeted indirect-cost rate per professional
labor-hour using
a. Quarterly budgeted billable hours as the denominator
b. Annual budgeted billable hours as the denominator
2. Compute the operating income for the following four
customers using
a. Quarterly indirect-cost rates
b. An annual indirect-cost rate
Aashish: 20 hours in February
Amit: 12 hours in March and 8 hours in April
Nitin: 8 hours in June and 12 hours in August
Sudhir: 10 hours in January, 4 hours in September,
and 6 hours in November.
3. Comment on your results in requirement 2.
Solution
1(a)
Budgete Budg
d fixed
eted
indirect hours
costs
JanMarch
AprilJune
JulySep
OctDec
1(b)
Rs
1,00,00
0
1,00,00
0
1,00,00
0
1,00,00
0
Budgete
d fixed
indirect
cost
rate per
hour
Budgeted
variable
indirect
cost rate
per hour
Budget
ed total
indirect
cost
rate
per
hour
Rs 25
20,00
0
Rs 5
Rs 20
10,00
0
4,000
10
20
30
25
20
45
20
36.67
6,000
Rs
4,00,000
16.67
40,00
0
Rs 10
Rs 20
Rs 30
2(a) All four jobs use 20 hours of professional labor time. The only
difference in job costing is the indirect cost rate. The quarterly based
indirect job costs are:
Aashish: (20 x Rs 25)
Rs 500
Amit: (12 x Rs 25) + (8 x Rs 30)
540
Nitin: (8 x Rs 30) + 12 x Rs 45)
780
Sudhir: (10 x Rs 25) + (4 x Rs 45) + (6 x Rs 36.67)
650
Particulars
Revenues, Rs 130 x 20
Direct costs, Rs 60 x 20
Indirect costs
Total costs
Operating income
Aashis
h
Rs
2,600
1,200
500
1,700
Rs 900
Amit
Nitin
Sudhir
Rs
2,6
00
1,200
540
1,740
860
Rs
2,600
Rs
2,600
1,200
780
1,980
620
1,200
650
1,850
750
2(b) Using annual based indirect job-cost rates, all four customers
will have the same operating income:
Revenues, Rs 130 x 20
Rs
2,600
Direct costs, Rs 60 x 20
1,200
Indirect costs, Rs 30 x 20
600
Total costs
1,800
Operating income
Rs 800
3. All four jobs use 20 hours of professional labor time. Using the
quarterly-based indirect-cost rates, there are four different operating
incomes because the work done on them is completed in different
quarters. In contrast, using the annual indirect-cost rate, all four
customers show the same operating income. All these different operating
income figures for jobs with the same number of professional labor-hours
are due to the allocation of fixed indirect costs.
An overview of the Tax Assist job-costing system is:
INDIRECT
COST
Office
Support
Professional
Labor-Hours
POOL
COST
ALLOCATION
BASE
COST BJECT:
JOB
DIRECT
COST
Indirect Costs
Direct Costs
Professional
Labor
Accounting for manufacturing
overhead. Consider the
following selected cost data for the Bharat Forge co. for the
current year
Budgeted
manufacturing
Rs 70,00,000
overhead
Budgeted machine-hours
2,00,000
Actual
manufacturing
Rs 68,00,000
overhead
Actual machine-hours
1,95,000
3.
or over allocation of
Rs 68,25,000
68,25, 000
25,000
Machining
department
Rs 1,00,00,000
Finishing
department
Rs 80,00,000
Rs 9,00,000
Rs 10,00,000
labor costs
Direct
manufacturing
labor-hours
Machine-hours
30,000
1,60,000
2,00,000
33,000
Required
1. Present an overview diagram of Hero Honda Motors jobcosting system
2. What is the budgeted overhead rate that should be used in
the machining Department? In the Finishing Department?
3. During the month of January, the job-cost record for Job 431
shows the follows:
Particulars
Machining
Finishing
departmen
departm
t
ent
Direct materials used
Rs 14,000
Rs 3,000
Direct
manufacturing
Rs 600
Rs 1,250
labor costs
Direct
manufacturing
30
50
labor-hours
Machine-hours
130
10
Compute the total manufacturing overhead allocated to Job
431.
4. Assuming that Job 431 consisted of 200 units of product,
what is the unit product cost of Job 431?
5. Amounts at the end of current year are as follows:
Particulars
Machining
Finishing
department
department
Manufacturing overhead
Rs
Rs 79,00,000
incurred
1,12,00,000
Direct
manufacturing
Rs 9,50,000
Rs 41,00,000
labor costs
Machine-hours
2,20,000
32,000
Compute the under or allocated manufacturing overhead for
each department and for the Gurgaon plant as a whole.
COST
ALLOCATION
BASE
COST OBJECT:
PRODUCT
DIRECT
COST
Machining Department
Manufacturing Overhead
Finishing Department
Manufacturing Overhead
Machine-Hours
in Machining Dept.
Direct Manufacturing
Labor Costs
in Finishing Dept.
Indirect Costs
Direct Costs
Direct
Manufacturing
Labor
Direct
Materials
80,00,000/40,00,000
200%
of
direct
Machining
Rs 14,000
department
- Finishing department
Direct manufacturing labor
Machining department
Finishing
department
3,000
600
1,250
18,850
Indirect costs
Machining department overhead,
Rs 50 x 130
Finishing department overhead,
200% of Rs 1,250
6,500
2,500
9,000
Total costs
Rs 27,850
The per unit product cost of job 431 is Rs 27,850/200 units = Rs
139.25 per unit
The point of this part is (a) to get the definitions straight
multiplying the actual amount of the allocation base by the
budgeted rate.
5. Particulars
Machinin Finishin
g
g
Manufacturing
overhead
incurred
Rs 79,00,00
(actual)
1,12,00,0
0
00
Manufacturing overhead allocated
2,20,000 hours x Rs 50
1,10,00,0
00
200% of Rs 41,00,000
82,00,00
_________
0
Underallocated
manufacturing
Rs
overhead
2,00,00 _________
0
Overallocated
manufacturing
Rs
overhead
3,00,0
00
Total overallocated overhead = Rs 3,00,000 Rs
Rs
2,00,000
1,00,000
Department
cause-and-effect
have
relationship
with
Problem:
Gurgaon Model
Feb-June 2004
Noida Model
May-Oct. 2004
Rs 2,12,900
Rs 72,552
1,800
Rs 2,55,208
Rs 82,820
2,020
Direct materials and direct labor are paid for on a contract basis. The
costs of each are known when direct materials are used or direct laborhours are worked. The Year 2 actual assembly-support costs were Rs
1,37,76,000, and the actual direct labor-hours were 328,000.
1.
2.
What is the job cost of the Gurgaon Model and the Noida
Model using (a) normal costing and (b) actual costing?
3.
1. Budgeted
indirect
Solution
cost
rate
Budgeted
indirect
2,55,208
82,820
3,38,028
Indirect costs
Assembly support (Rs 50 x
1,800; 50 x 2020)
Total costs
90,000
1,01,000
3,75,452
4,39,028
Rs
2,12,900
72,552
2,85,452
2,55,208
75,600
84,840
3,61,052
4,22,868
82,820
3,38,028
INDIRECT
COST
Assembly Support
POOL
COST
ALLOCATION
BASE
COST OBJECT:
RESIDENTIAL
HOME
Direct Labor-Hours
Indirect Costs
Direct Costs
DIRECT
COSTS
Direct
Materials
40000000
10000000
26000000
36000000
4000000
COST
of 10 per
cent of revenues? Consulting Support
POOL
Solution
Indirect Costs
Direct Costs
DIRECT
COSTS
Professional
Labor
Rs 6,000
16,000
20,000
48,000
90,000
2,34,0
00
Total costs
Rs
3,24,000
Bid price to earn target operating income to revenue margin of
10 per cent can be calculated as follows:
Let R = revenue to earn target income
R 0.10R = Rs 3,24,000
0.90R = Rs 3,24,000
R = Rs 3,24,000/0.90 = Rs 3,60,000
Or
Direct costs
Indirect costs
Profit (0.40 x 90,000)
Bid price
Rs 90,000
2,34,000
36,000
3,60,000