Dodge Products Uses a Job-Costing System for Its Units, Which

question 36

Essay

Dodge Products uses a job-costing system for its units, which pass from the Machining Department, to the Assembly Department, to finished-goods inventory. The Machining Department is heavily automated; in contrast, the Assembly Department performs a number of manual-assembly activities. The following information relates to the Machining Department for the year just ended: $\begin{array} { l r } \text { Budgeted manufacturing overhead } & \$ 12,000,000 \\\text { Actual manufacturing overhead } & 12,142,000 \\\text { Budgeted machine hours } & 800,000 \\\text { Actual machine hours } & 794,000\end{array}$ The Machining Department data that follow pertain to Job No. 775, the only job in production at year-end. $\begin{array}{l}\begin{array}{lll}\text { Direct material used }\\\text { Direct labour }\\\text { Machine hours }\\\end{array}\begin{array}{lll}\$ 125,000 \\61,800 \\550\end{array}\end{array}$ Required:
A. Assuming the use of normal costing, calculate the predetermined overhead rate that is used in the Machining Department.
B. Compute the cost of the Machining Department's year-end work-in-process inventory.
C. Determine whether overhead was under- or overapplied during the year in the Machining Department.
D. If Dodge disposes of the Machining Department's under- or overapplied overhead as an adjustment to Cost of Goods Sold, would the company's Cost-of-Goods-Sold account increase or decrease? Explain.
E. How much overhead would have been charged to the Machining Department's Work-in-Process account during the year?
F. Comment on the appropriateness of direct labour cost as a cost driver to apply manufacturing overhead in the Assembly Department.

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Definitions:

Mons Veneris

The pubic mound; literally, “mountain of Venus.” Also known as mons pubis.

Labia Minora

Two small folds of skin within the labia majora that meet above the clitoris to form the clitoral hood. Also known as inner lips.

Clitoris

An external sexual structure that is the center of arousal in the female; located above the vagina at the meeting of the labia minora.

Bartholin's Glands

Small glands located near the vaginal opening in women, responsible for secreting fluid that lubricates the vagina.