Question

10 . Eisentrout Corporation has two production departments, Machining and Customizing. The company uses a job-order costing system and computes a predetermined overhead rate in each production department. The Machining Department’s predetermined overhead rate is based on machine-hours and the Customizing Department’s predetermined overhead rate is based on direct labor-hours. At the beginning of the current year, the company had made the following estimates:

	Machining		Customizing
Machine-hours		16,000		11,000
Direct labor-hours		2,000		6,000
Total fixed manufacturing overhead cost	$	104,000	$	56,400
Variable manufacturing overhead per machine-hour	$	2.10
Variable manufacturing overhead per direct labor-hour			$	3.30

During the current month the company started and finished Job T272. The following data were recorded for this job:

Job T272:	Machining		Customizing
Machine-hours		60		30
Direct labor-hours		10		60

The estimated total manufacturing overhead for the Machining Department is closest to:

Answer 1

Computation of Estimated Total Manufacturing Overhead for Machining Department

Machine Hour Require:- 60 Machine hour

Predetermine Overhead Rate :- $6.5 per Machine hour

Estimated total Manufacturing OH for Machining Department = (60*$6.5)= $390

Working Note

For Machining Department

Predetermine Overhead Rate= Fixed Manufacturing Overhead Cost/ Machine Hour

=104000/16000= $6.5 per Machine Hour

For Customizing Department

Predetermine Overhead Rate= Fixed Manufacturing Overhead Cost/ Labour Hour

=56400/6000= $9.40/ Labour Hour