Question

Agassi Company uses a job order cost system in each of its three manufacturing departments. Manufacturing overhead is applied to jobs on the basis of direct labor cost in Department D. direct labor hours in Department E, and machine hours in Department K. In establishing the predetermined overhead rates for 2020, the following estimates were made for the year. Department D. Manufacturing overhead $784,000 $1,500,000 $780,000 Direct labor costs $1,120,000 100,000 $1,250,000 $450,000 Direct labor hours 125,000 40,000 Machine hours 400,000 500,000 120,000 During January, the job cost sheets showed the following costs and production data. Department Direct materials used $140,000 $126,000 $78,000 Direct lator costs $120,000 $110,000 $37,500 Manufacturing overhead incurred $99,000 $124,000 $79,000 Direct labor hours 8,000 11,000 3,5c0 Machine hours 34,000 45,000 10,400 Compute the predetermined overhead rate for each department. (Round answers to 2 decimal places, e.g. 12.50 or 12.so.) Overhead rate Department D Department E per direct labor hour Department K per machine hour

Answer 1

1) Overhead rate

	Overhead rate
Department D	784000/1120000 = 70% of labor cost
Department E	1500000/125000 = 12 per labor hour
Department K	780000/120000 = 6.50 per machine hour

2) Total manufacturing cost

	Total manufacturing cost
Department D	140000+120000*1.7 = 344000
Department E	126000+110000+11000*12 = 368000
Department K	78000+37500+10460*6.5 = 183490

3) Under or over applied overhead

	Manufacturing overhead
Department D	84000-99000 = 15000 Under applied
Department E	132000-124000 = 8000 Over applied
Department K	67990-79000 = 11010 Under applied