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:

	Department
	Molding			Painting
Direct labor-hours		35,000			57,800
Machine-hours		89,000			36,000
Fixed manufacturing overhead cost	$	249,200		$	560,660
Variable manufacturing overhead per machine-hour	$	2.40			-
Variable manufacturing overhead per direct labor-hour		-		$	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:

	Department
	Molding			Painting
Direct labor-hours		78			133
Machine-hours		370			65
Direct materials	$	942		$	1,140
Direct labor cost	$	730		$	1,010

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 28 units, what would be the unit product cost?

Answer 1

Answers

• [1]

Working		Molding	Painting
A [given]	Total Fixed manufacturing Overhead cost	$249,200	$560,660
	Allocation base	machine hours	direct labor hours
B [given]	Amount of allocation base	89,000	57,800
C = A/B	Fixed Overhead rate	$                         2.80	$                                      9.70
D [given]	Variable overhead rate	$                         2.40	$                                      4.40
E = C+D	Predetermined Overhead rates = ANSWER	$                         5.20	$                                    14.10

• [2]

Total Overhead cost applied = (370 MHs x $ 5.20) + (133 DLHs x $ 14.10)
= 1924 + 1875
= $ 3799

• [3]

	Molding	Painting	Total
Direct Material Cost	$942	$1,140	$2,082
Direct Labor Cost	$730	$1,010	$1,740
Manufacturing Overhead cost applied	$1,924	$1,875	$3,799
Total manufacturing cost assigned	$3,596	$4,025	$7,621

• [4]

Unit Product cost = $ 7621 / 28 units
= $ 272.18 per unit