Homework answers / question archive / (a) Using the information below

(a) Using the information below

Business

Share With

(a) Using the information below. you are required to complete the Job Cost sheet (provided in EXCEL) to show all the total product costs for Job "A"; which includes 15 units of paper hats and 10 units of chains. (5%) (b) Shahira Osama, the company CEO, has asked you to help in identifying some other method for allocating overhead in the determination of product cost. Identify at least one other possible way of allocating the overhead and hence RECALCULATE the product cost of the job "A" (using sheet 2 of the EXECL). (5%) (e) You are also required to respond to the following questions: (5%) List one advantage and a disadvantage of using direct labor hours as a basis for allocating manufacturing overhead costs. → What can you conclude about the product cost of Job "A" based on the two allocation methods which you have used in (a) and (b) above? JOB "A" Costs for the Month of September Production and sales of Hats Production and sales of Chains 15 units 10 units Direct Material #Sheets of paper used to make HATS #Sheets of paper used to make CHAINS #stickers to make HATS #stickers to make CHAINS 1 per unit s 0.05 per sheet 1 per units 0.05 per sheet 4 per unit S 0.01 cach 8 per unit S 0201 cach 2.500 Direct Labor HOURS Cutting labor hours Assembly labor hours Finishing labor hours Total Direct Labor Hours (September) Chains Total hours 1.500 1.500 3.000 5.500 1.500 4.000 6.000 11.000 2.500 5,000 Hats Chains Total Dineer Labor COSTS Cutting labor Assembly labor Finishing labor TOTAL DIRECT LABOR COSTS Cost per hour $ 15.00 $15.00 $15.00 320 360 Manufacturing Overhead (TOTALS) Quality control hours Indirect labor -- Supervisor Other indirect labor (stockroom, materials960 handling) Depreciation on tape machines $1,000 Depreciation on stapling machines $2,000 hours 40.00 per hour hours $ 60.00 per hour hours $15.00 per hour per month per month per month Depreciation on cutting machine 53,000 Rent and taxes on the factory $10,000 per Utilities month per month $1.500 $100 S150 Staples Tape The manufacturing process for paper chains is as follows 1) Paper is delivered by Materials Handling to the Cutting Department. 2) Links are cut into 2"by 8.5" strips. Five strips can be made from one sheet of paper. Cut strips are moved to the Assembly Department. 3) Each link is connected to the previous link and then taped and stapled in the Assembly Department. Completed chains are moved to the Finishing Department. 4) Chains are decorated in the Finishing Department using eight stickers per completed chain. 5) Chains are placed on a table for inspection by quality control. Chains are then inspected by Quality Control before being packed for shipment with the completed job. The following raw materials are used in order to manufacture these products: colored paper. staples, tape, and stickers. The following "manufacturing equipment" is used in this factory simulation: stapler, tape dispenser, and scissors. The Product Costing Process The next step is to determine the cost to produce each job and each unit. PPF uses a job costing system, whereby each job is the cost object. Costs are accumulated by job as follows:(1) Direct material and direct labor are traced to each job based on the information obtained from the materials requisition requests and factory employee timecards (2) The company accumulates factory overhead into one Manufacturing Overhead cost pool. At the PPF, Manufacturing Overhead is applied using an application rate based on the total actual direct labor hours. The Paper Products Factory targets its selling price at 115% of product cost. Below is the list of products costs related to the manufacturing process for paper chains and paper hats. Product Costs Paper direct material Stickers direct material Direct labor -- Cutting AssemblyFinishing direct labor Staples indirect -- manufacturing overhead Tape indirect -- manufacturing overhead Quality control labor indirect -- manufacturing overhead Supervisory labor indirect -- manufacturing overhead Other indirect labor (stockroom, materials handing) indirect -- manufacturing overhead Depreciation on tape machines indirect -- manufacturing overhead Depreciation on stapling machines indirect -- manufacturing overhead Depreciation on cutting machine indirect -- manufacturing overhead Depreciation on the factory portion of the building indirect -- manufacturing overhead Taxes on the factory portion of the building indirect -- manufacturing overhead Page 4 of 6