Question

High Desert Potteryworks makes a variety of pottery products that it sells to retailers. The company uses a job-order costing system in which departmental predetermined overhead rates are used to apply manufacturing overhead cost to jobs. The predetermined overhead rate in the Molding Department is based on machine-hours, and the rate in the Painting Department is based on direct labor-hours. At the beginning of the year, the company provided the following estimates: Direct labor-hours Machine-hours Fixed manufacturing overhead cost Variable manufacturing overhead per machine-hour Variable manufacturing overhead per direct labor-hour Department Molding Painting 33,500 56,900 86,000 35,000 $232,200 $551, 930 $ 2.40 - $ 4.40 Job 205 was started on August 1 and completed on August 10. The company's cost records show the following information concerning the job: Direct labor-hours Machine-hours Direct materials Direct labor cost Department MoldingPainting 87 129 310 74 $ 934 $1,220 $ 700 $ 970 Required: 1. Compute the predetermined overhead rates used in the Molding Department and the Painting Department. 2. Compute the total overhead cost applied to Job 205. 3-a. What would be the total manufacturing cost recorded for Job 205? 3-b. If the job contained 32 units, what would be the unit product cost?

Answer 1

Answers

• All working forms part of the answer
• Requirement 1

Molding = $ 5.10 per MH
Painting = $ 14.10 per DLHs

Working		Molding	Painting
A [given]	Total Fixed manufacturing Overhead cost	$232,200	$551,930
	Allocation base	machine hours	direct labor hours
B [given]	Amount of allocation base	86,000	56,900
C = A/B	Fixed Overhead rate	$                         2.70	$                                      9.70
D [given]	Variable overhead rate	$                         2.40	$                                      4.40
E = C+D	Predetermined Overhead rates	$                         5.10	$                                    14.10

• Requirement 2

Total Overhead cost allocated = (310 MHs x $ 5.10) + (129 DLHS x $ 14.10)
= 1581 + 1819
= $ 3400

• Requirement 3

	Molding	Painting	Total
Direct Material Cost	$934	$1,220	$2,154
Direct Labor Cost	$700	$970	$1,670
Manufacturing Overhead cost applied	$1,581	$1,819	$3,400
Total manufacturing cost assigned	$3,215	$4,009	$7,224

• Requirement 4
  Unit Product Cost = $ 7224 / 32 units
  = $ 225.75 per unit.