Black Meter Company

CASE 19-2: Black Meter Company

1- Trace through the accounting procedures described so that you are able to show how the numbers in each illustration are derived from, and/or help derive, the other illustrations.

Illustration A19-1: Standard Labor and Overhead Rates Partial Listing

| | Rate per Hour |

Department No. | Department Name | Labor | Overhead | Total |

120A | Foundry – molding | $18.00 | $31.50 | $49.50 |

120B | Foundry - grinding and snagging | 16.00 | 24.00 | 40.00 |

122 | Small parts manufacture | 16.50 | 26.40 | 42.90 |

123 | Interior parts manufacture | 15.50 | 24.80 | 40.30 |

130 | Train, register, and interior assembly | 14.00 | 17.50 | 31.50 |

131 | Small meter assembly | 15.00 | 18.75 | 33.75 |

Labor rate per hour

“This is done on a departmental basis because each department is a cost center. For each production department, the accountants start with data on actual direct labor payroll, including fringe benefits, and the number of direct-labor hours worked in each of the past few years. The departmental supervisors advise what adjustments should be made to take account of future conditions. Thus, an amount for total labor cost and an amount for hours worked at normal levels of activity are derived. Dividing the payroll amount by the normal number of hours yields a standard labor rate per standard direct labor-hour for each department.”

Overhead rate per hour

“Overhead costs for a production department include overhead costs incurred in that department plus an allocated portion of the costs of service departments. Estimates are made of these amounts for each production department at normal volume. These estimated total overhead costs are divided by the standard number of direct labor-hours for each producing department […] to arrive at an overhead rate per standard direct labor-hour.”

Illustration A19-2: Foundry Standard Cost

Drawing No.: D-2408 | Part: 5/8" HF Chamber Rings | Material Cost1: |...