Exercise on JOC
EXERCISE ON JOC
Woody S.p.A. produces high quality wooden toys.
The company has three production departments:
- preparation department
- machining department
- finishing department
Budgeted overhead costs for the next month are expected to be as follows:
| c1 | c2 | c3 |
|---|---|---|
| Rent | 1.000 € | |
| Electricity to power machines | 100 € | |
| Cleaning | 60 € | |
| Machine depreciation | 200 € |
Furthermore, salaries of each of the indirect workers are as follows:
| c1 | c2 | c3 |
|---|---|---|
| Preparation department | 2.000 € | |
| Machining department | 2.400 € | |
| Finishing department | 1.800 € |
There are indirect workers within each of the three departments and none of them does any direct work.
Each department counts also direct workers (specifically, 6 workers in the preparation department, 9 in the machining department and 5 in the finishing department).
Each of them is expected to work 160 hours the following month and they are paid 12 € an hour.
All of the machinery is in the machining department.
Machines are expected to operate for 1.000 hours the following month.
The floor space (in square meters) occupied by the departments is as follows:
| c1 | c2 | c3 |
|---|---|---|
| Preparation department | 15.000 m2 | |
| Machining department | 20.000 m2 | |
| Finishing department | 5.000 m2 |
You are required:
- To calculate the total overhead in each department
-
Assume that the machining department overheads are to be charged to jobs on a machine hour basis, but that the direct labor hour basis is to be used for the other two departments.What will be the full cost of a job with the following characteristics?
| c1 | c2 | c3 | |
|---|---|---|---|
| Preparation | Machining | Finishing | |
| Direct labor hours | 10 | 7 | 5 |
| Machine hours | - | 8 | - |
| Direct materials | 85 € | 13 € | 6 € |