Cost Accounting: Wheeled Coach

WHEELED COACH: Job Costing

Step 1: Identify the job that is the chosen cost object:

Job 06-MX24D for a top-of-the-line ambulance

Step 2: Identify the direct costs of the job:

Direct materials $22,750

Direct manufacturing labor $25,200

Step 3: Select the cost-allocation bases to use for allocating indirect costs to the job:

Indirect costs include plant supervision, engineering, plant lease and utilities, and maintenance. Wheeled Coach uses direct manufacturing labor-hours of 700,000 to allocate indirect costs to the job.

Step 4: Identify the indirect costs associated with each cost-allocation base:

With a single allocation base, direct manufacturing labor-hours, a single cost pool called manufacturing overhead costs can be used to represent indirect costs.

Manufacturing overhead costs $21 million.

Step 5: Compute the rate per unit of each cost-allocation based used to allocate indirect costs to the job:

This is done by dividing total overhead costs in the pool (step 4) by the total quantity of the allocation base (step 3).

$21 million / 700,000 direct manuf. labor-hours = $30 per direct manuf. labor-hour

Step 6: Compute the indirect costs allocated to the job:

Multiply the actual quantity of direct manufacturing labor-hours used for each job by the rate from step 5.

1,750 direct manufacturing labor-hours X $30 per direct manufacturing labor-hour = $52,500.

Step 7: Compute the total cost of the job by adding all direct and indirect costs assigned to the job.

For Wheeled Coach Job 06-MX24D:

Direct manufacturing costs

Direct materials $ 25,200

Direct manufacturing labor $ 22,750 $47,950

Manufacturing overhead costs

(1,750 hours @ $30 per direct manuf. labor-hour) $ 52,500

Total manufacturing costs of job $100,450

2. The case directly states that Wheeled Coach uses a detailed “bill of materials,” however, in addition to this I would...