Madetoja Oy’s Job-costing system has two direct-cost categories:

Madetoja Oy’s Job-costing system has two direct-cost categories: direct materials and direct manufacturing labor. Manufacturing overhead (both variable and fixed) is allocated to products on the basis of standard direct manufacturing labor-hours (DLH). At the beginning of 2008, Madetoja adopted the following standards for its manufacturing costs.

Direct materials 15.00

Direct manufacturing labor 75.00

Manufacturing overhead


Fixed 6.00 per DLH 30.00

Standard manufacturing cost per output unit 160.00

The denominator level for total manufacturing overhead per month in 2008 is 40,000 direct manufacturing labor-hours. Madetoja’s flexible budget for January 2008 was based on this denominator level. The records for January indicate the following:

Direct materials purchased 25,000 at 5.20 per kg

Direct materials used 23,100 kg

Direct manufacturing labor 40,100 hours at 14.60 per hour

Total actual manufacturing overhead (variable and fixed) 600,000

Actual production 7,800 output units

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