Explain the circumstances under which you use job costing

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Reference no: EM132551937

Henry Mulenga has three production departments;
- Preparation
- Assembly and - Finishing
They also have two service departments;
- Maintenance and
- Material handling

The budgeted information for the year 2018 is as follows;

Department	Overhead Cost Allocated/apportioned	Capacity Utilization
	ZMW
Preparation	180,000.00	40 machine hours
Assembly	96,000.00	120 labour hours
Finishing	84,000.00	120 labour hours
Maintenance	12,000.00
Material handling	8,000.00

b. The service department costs should be re-apportioned to the production departments as follows;
Preparation Assembly Finishing
Maintenance 60% 10% 30%
Material Handling 40% 30% 30%

c. The preparation department's machines are supervised by a machine minder whose wage is an overhead cost. In the assembly and finishing departments, the wage rate is K2,200.00 per hour
d. Administration and selling overheads are to be absorbed in Job costs at 20% of production cost. Distribution overhead should be added to each job according to quotes from outside carriage companies.
Henry Mulenga wishes to quote for job 35 using a total absorption cost method to establish the selling price. The following information is also available for Job 35:
i. Direct material cost - K410,000.00
ii. Time required - Preparation 3 machine hours
Assembly 4 labour hours
Finishing 5 labour hours
iii. Special design drawings - K166,000.00
iv. Distribution quote from haulage company 1(150,000.00 Required:
a. Explain the circumstances under which you use job costing
b. Calculate the total cost for Job 35
c. What is the expected selling price for Job 35 if the profit margin is 25%

Reference no: EM132551937

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