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Despite operating at capacity, last year’s performance was a great disappointment to the managers. In total, 10 jobs were accepted and completed, incurring the following total costs:
Direct materials$1,035,400 Direct labor 4,000,000 Manufacturing overhead 1,040,000
Of the $1,040,000 manufacturing overhead, 30 percent was variable overhead and 70 percent was fixed.
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This year, Brighton Services expects to operate at the same activity level as last year, and overhead costs and the wage rate are not expected to change. For the first quarter of this year, Brighton Services completed two jobs and was beginning the third (Job 103). The costs incurred follow:
JobDirect MaterialsDirect Labor101$137,200 $490,000 102 93,000 312,400 103 94,000 197,600 Total manufacturing overhead 271,200 Total marketing and administrative costs 112,000
You are a consultant associated with Lodi Consultants, which Brighton Services has asked for help. Lodi’s senior partner has examined Brighton Services’s accounts and has decided to divide actual factory overhead by job into fixed and variable portions as follows:
Actual Manufacturing Overhead VariableFixed101$29,900 $104,000 102 27,500 88,200 103 4,600 17,000 $62,000 $209,200
In the first quarter of this year, 40 percent of marketing and administrative cost was variable and 60 percent was fixed. You are told that Jobs 101 and 102 were sold for $850,000 and $550,000, respectively. All over- or underapplied overhead for the quarter is written off to Cost of Goods Sold.
a. Present in T-accounts theactual manufacturing cost flows for the three jobs in the first quarter of this year.