Job Order Costing for Dog Collars
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RKH Corporation makes two types of dog collars: leather and nylon. In a typical month, they make and sell 1,500 leather collars and 3,000 nylon collars. In April 2005, however, they made (and sold) 1,200 leather collars and 2,400 nylon collars. Costs incurred in April 2005 are listed below:
Raw leather $1,800
Raw nylon 6,000
Buckles (one per collar) 2,700
Assembly line wages 10,800
All assembly line workers earn $15 / hour, but a leather collar takes twice as long to make as a nylon collar. The total cost of a leather collar is $11.00; a leather collar sells for $15.00. A nylon collar sells for $9.00. Any individual cost that comprises at least 5% of a product's total cost is considered direct.
1i) As a percentage, calculate the following and say which component of cost is the smallest for leather collars.
a. Material
b. Labor
c Overhead
d. Cannot be determined from the information given
ii) Now do the same for nylon collars.
2) For a nylon collar, the total direct material cost is:
a. $ 3.25
b. $ 2.50
c. $ 0.75
d. Some other amount
3) The labor cost for a leather collar is __________ times as large as the labor cost for a nylon collar.
a. two
b. three
c. four
d. five
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Solution Summary
The solution explains the calculations needed to solve these job order costing problems clearly in 309 words and figures.
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1)
i) For a leather collar, the costs are
Direct Material 1,800/1,200 = 1.50
Cost of one buckle is 2,700/3,600=0.75
Total direct material cost is $2.25
Total labor cost is 10,800 and the rate is $15/hr
Number of hours worked is 10,800/15 = 720.
It takes twice as long to make the leather collar as the nylon collar. If it takes x hours for Nylon, it will take 2x hours for leather. We get
1,200 X 2x + 2,400 X x = 720
This gives x ...
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