Dupage Powder Coating
Essay by Krishnan Iyer • October 11, 2018 • Case Study • 358 Words (2 Pages) • 1,515 Views
MANAGERIAL ACCOUNTING
CASE -DUPAGE POWDER COATING
The company applies powder coating to variety of materials. In prior years the finishes were applied by hand and manufacturing overheads were allocated based on direct labor hours. In the current year the company purchased new computer controlled electrostatic powder coating system and reduced the labor hours.
An order from Cedargreen Enterprises was received by the company to powder coat 4 tables and 16 chairs.
QUES a & b. The cost of the job in the current and the prior year:
[pic 1]
ANALYSIS OF TABLE
The total cost is dependent on majorly three factors
- Direct labor
- Direct cost
- Manufacturing Overheads
Direct material and direct labor costs are directly traceable to the products being manufactured and are 500 and 140(due to 7 laborer’s) respectively. Manufacturing overhead, however, consists of indirect factory-related costs and as such must be divided up and allocated to each unit produced
In the current year there is an increase in the overheads due to purchase of a new equipment and a decrease in labor hours which lead to an overhead rate of 22.15. Hence the total cost amounted to 795.0769
In the prior year the overheads were lesser than that in the present year and the rate is 12. With the same direct labor and direct cost, the total cost amounted to 724.
Ques c. Why is the accounting system making the cost of small jobs look costlier?
The difference in the cost arises due to the increase in overheads, which is due to purchase of the new machinery. Although this job does not use the new equipment the overall manufacturing overheads of the company has increased which lead to the increase in the total cost.
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