Question

Problem 2-19 Multiple Predetermined Overhead Rates; Applying Overhead (LO2-1, LO2-2, LO2-4) 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 12.000 60,000 70.000 8.000 $ 497,000 $ 615,000 $ 1.50 - $ 2.00 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 Machine-hours Direct materials Direct labor cost 110 $ 770 $ 525 20 $1.112 $1,470

Answer 1

Answer to Requirement 1:

Molding Department:

Estimated manufacturing overhead = Estimated variable manufacturing overhead per machine hour * Estimated machine hours + Estimated fixed manufacturing overhead
Estimated manufacturing overhead = $1.50 * 70,000 + $497,000
Estimated manufacturing overhead = $602,000

Predetermined overhead rate = Total estimated manufacturing overhead / Total estimated machine hours
Predetermined overhead rate = $602,000 / 70,000
Predetermined overhead rate = $8.60 per machine hour

Painting Department:

Estimated manufacturing overhead = Estimated variable manufacturing overhead per labor hour * Estimated labor hours + Estimated fixed manufacturing overhead
Estimated manufacturing overhead = $2.00 * 60,000 + $615,000
Estimated manufacturing overhead = $735,000

Predetermined overhead rate = Total estimated manufacturing overhead / Total estimated labor hours
Predetermined overhead rate = $735,000 / 60,000
Predetermined overhead rate = $12.25 per labor hour

Answer to Requirement 2:

Molding Department:

Manufacturing overhead applied = Predetermined overhead rate * Actual machine hours
Manufacturing overhead applied = $8.60 * 110
Manufacturing overhead applied = $946

Painting Department:

Manufacturing overhead applied = Predetermined overhead rate * Actual labor hours
Manufacturing overhead applied = $12.25 * 84
Manufacturing overhead applied = $1,029

Total manufacturing overhead for Job 205 = Total manufacturing overhead for Molding Department + Total manufacturing overhead for Painting Department
Total manufacturing overhead for Job 205 = $946 + $1,029
Total manufacturing overhead for Job 205 = $1,975

Answer to Requirement 3-a:

Molding Department:

Total manufacturing cost = Direct materials + Direct labor + Manufacturing overhead applied
Total manufacturing cost = $770 + $525 + $946
Total manufacturing cost = $2,241

Painting Department:

Total manufacturing cost = Direct materials + Direct labor + Manufacturing overhead applied
Total manufacturing cost = $1,332 + $1,470 + $1,029
Total manufacturing cost = $3,831

Manufacturing cost for Job 205 = Total manufacturing cost for Molding Department + Total manufacturing cost for Painting Department
Manufacturing cost for Job 205 = $2,241 + $3,831
Manufacturing cost for Job 205 = $6,072

Answer to Requirement 3-b:

Unit product cost = Total manufacturing cost / Number of units produced
Unit product cost = $6,072 / 50
Unit product cost = $121.44