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Horngren, Datar and Rajan Chapter 4: Robinson Company job WPP 298 under normal and actual costing
| Tool | Job Quote Builder |
| Source | Horngren, C. T., Datar, S. M., and Rajan, M. V. (2015). Cost Accounting: A Managerial Emphasis, 15th ed. Pearson, Boston. Chapter 4, Robinson Company job WPP 298. |
| Level | Undergraduate |
Problem
Robinson Company builds a paper-making machine for Western Pulp and Paper (job WPP 298) with direct materials of 4,606 and 88 direct manufacturing labour-hours costing 1,579. Budgeted overhead is 1,120,000 for 28,000 labour-hours; actual overhead turned out to be 1,215,000 for 27,000 hours. Find the cost of the job under normal costing and under actual costing, and the gross margin at the 15,000 price.
Inputs to Enter
- Example select: Horngren, Robinson Company job WPP 298
- Materials 4,606; labour 88 h at 17.943182 per hour (1,579); overhead 40.00 per labour-hour (budgeted rate 1,120,000 / 28,000); quantity 1
- For actual costing change the rate to 45.00 per hour (1,215,000 / 27,000); competitor's or quoted price 15,000
Answers
- Normal costing: overhead 88 × 40 = 3,520, total manufacturing cost 4,606 + 1,579 + 3,520 = 9,705
- Actual costing: overhead 88 × 45 = 3,960, total 10,145
- Revenue 15,000: gross margin 5,295 (35.3 % of the price)
Notes
Choose the Robinson entry in the example select; the labour rate is entered to six decimals so that 88 hours give exactly 1,579.