Com Prob 5 
COMPREHENSIVE PROBLEM 5
The Gilster Company
This problem covers various topics from Chapters 15 through 21. The emphasis is on job costing, overhead allocation, target costing, and incremental decision making.
60 Strong
Copyright © 2015 by McGraw-Hill Education All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.
COMPREHENSIVE PROBLEM 5
THE GILSTER COMPANY
60 Minutes, Strong
a. Plantwide overhead rate using direct labor hours:
Overhead
Rate
=
Total Expected Overhead
Total Expected Direct Labor Hours
=
($250,000 + $150,000 + $600,000)
(35,000 hrs. + 15,000 hrs.)
=
$1,000,000
50,000 hrs.
= $20 per direct labor hr.
Manufacturing costs for Job 110:
Direct materials
Direct labor—Dept. A
Direct labor—Dept. B
Manufacturing
overhead
Total cost
$
(2,200 hours)
(800 hours)
(3,000 hours x
$20)
25,000
45,000
10,000
60,000
$ 140,000
Total cost/unit = $140,000/10,000 units = $14 per unit
b. Plantwide Overhead Rate Using Machine Hours
=
Budgeted Plantwide Overhead
Expected Total Machine Hours
=
$250,000
(10,000 hrs. + 40,000 hrs.)
$250,000
= 50,000 hrs. = $5 per machine hour
Overhead Rate—Department A
= Budgeted Dept. A Overhead
Expected Dept. A Machine
= $150,000
10,000 hrs. = $15 per machine hour
Overhead Rate—Department B
= Budgeted Dept. B Overhead
Expected Dept. B Machine
= $600,000
40,000 hrs. = $15 per machine hour
Copyright © 2015 by McGraw-Hill Education All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.
COMPREHENSIVE PROBLEM 5
THE GILSTER COMPANY (continued)
Manufacturing costs for Job 110:
Direct materials ……………………………………………………………………………… $
Direct labor—Dept. A ………………………………………………………………………
Direct labor—Dept. B ………………………………………………………………………
Manufacturing overhead—Plant [(200 hrs. + 1,200 hrs.) × $5/mach. hr.] ………………
Manufacturing overhead—Dept. A (200 hrs. × $15/mach. hr.) …………………………
Manufacturing overhead—Dept. B (1,200 hrs.
The Gilster Company
This problem covers various topics from Chapters 15 through 21. The emphasis is on job costing, overhead allocation, target costing, and incremental decision making.
60 Strong
Copyright © 2015 by McGraw-Hill Education All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.
COMPREHENSIVE PROBLEM 5
THE GILSTER COMPANY
60 Minutes, Strong
a. Plantwide overhead rate using direct labor hours:
Overhead
Rate
=
Total Expected Overhead
Total Expected Direct Labor Hours
=
($250,000 + $150,000 + $600,000)
(35,000 hrs. + 15,000 hrs.)
=
$1,000,000
50,000 hrs.
= $20 per direct labor hr.
Manufacturing costs for Job 110:
Direct materials
Direct labor—Dept. A
Direct labor—Dept. B
Manufacturing
overhead
Total cost
$
(2,200 hours)
(800 hours)
(3,000 hours x
$20)
25,000
45,000
10,000
60,000
$ 140,000
Total cost/unit = $140,000/10,000 units = $14 per unit
b. Plantwide Overhead Rate Using Machine Hours
=
Budgeted Plantwide Overhead
Expected Total Machine Hours
=
$250,000
(10,000 hrs. + 40,000 hrs.)
$250,000
= 50,000 hrs. = $5 per machine hour
Overhead Rate—Department A
= Budgeted Dept. A Overhead
Expected Dept. A Machine
= $150,000
10,000 hrs. = $15 per machine hour
Overhead Rate—Department B
= Budgeted Dept. B Overhead
Expected Dept. B Machine
= $600,000
40,000 hrs. = $15 per machine hour
Copyright © 2015 by McGraw-Hill Education All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.
COMPREHENSIVE PROBLEM 5
THE GILSTER COMPANY (continued)
Manufacturing costs for Job 110:
Direct materials ……………………………………………………………………………… $
Direct labor—Dept. A ………………………………………………………………………
Direct labor—Dept. B ………………………………………………………………………
Manufacturing overhead—Plant [(200 hrs. + 1,200 hrs.) × $5/mach. hr.] ………………
Manufacturing overhead—Dept. A (200 hrs. × $15/mach. hr.) …………………………
Manufacturing overhead—Dept. B (1,200 hrs.