Pigot Corporation uses job costing and has two production departments, M and A B

ID: 2336118 • Letter: P

Question

Pigot Corporation uses job costing and has two production departments, M and A Budgeted manufacturing costs for the year are as follow: Direct materials Direct labor Factary owerhead Dept. M Dept. A 711000 111000 211000 822,000 ,000 633,000 411 The actual direct material and direct labor costs cherged to Job. No. 432 during the year were as follows $46,000 Direct material Direct labor Departmaent M Department A $19000 42000 23,000 42000 Pigot applies manufacturing over heed to production or ders on the basis of direct labor cost using depertmental rates predetermined at the beginning of the year based on the annual budget The totel cost associated with Job. No. 432 for the year should be $110.500. O $156.500. o $114,500. O $130,000.

Explanation / Answer

Answers

--For finding put total cost of the Job, first we need to calculate how much of overhead is allocated or applied to the Job 432

--Working for allocation of Overhead cost:

Working

Department M

Department A

Factory Overhead

$ 633,000.00

$ 411,000.00

Direct Labor cost

$ 211,000.00

$ 822,000.00

C = A/B

Predetermined Overhead rate

$ 3.00

$ 0.50

Amount of Direct labor cost for Job 432

$ 19,000.00

$ 23,000.00

E = C x D

Amount of Overhead applied to the Job

$ 57,000.00

$ 11,500.00

---Calculation of total cost and Answer

Direct material

$ 46,000.00

Direct Labor

$ 42,000.00

Manufacturing Overhead applied [57000 + 11500]

$ 68,500.00

Total cost associated for the Job 432

$ 156,500.00

Correct Answer

Option #2: $ 156,500

The correct entry to record Manufacturing Overhead costs for INDIRECT MATERIAL is Option ‘A’:

Manufacturing Overhead Control a/c debited and material Inventory a/c Credited.

This is because Indirect material is part of factory manufacturing overhead.