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 2017, the following estimates were made for the year Manufacturing overhead Direct labor costs Direct labor houns Machine hours $1,800,000 1,500,000 840,000 S2,250,000 1,500,000 $540,000 48,000 120,000 120,000 125,000 480,000 500,000 During January, the job cost sheets showed the following costs and production data. Direct materials used Direct labor cost Manufacturing overhead incurred $118,800 $148,800 $94,800 Direct labor hours Machine hours $168,000 151.200 $93,600 144,000 $132,000 $45,000 9,600 40,800 13,200 4,200 54,000 10,420 Your ansvrer is correct. Compute the predetermined overhead rate for each department. (Round answers to 2 decimal places, e.g. 10.25.) Overhead rate per direct labor hour Department K per machine hour

Answer 1

Solution 1:

Predetermined overhead rates:

Department D = Estimated overhead / Estimated direct labor cost = $1,800,000 / $2,250,000 = 80%

Department E = Estimated overhead / Estimated Direct labor hours = $1,500,000 / 125000 = $12 per labor hour

Department K = Estimated overhead / Estimated machine hours = $840,000 / 120000 = $7 per machine hour

Solution 2:

Computation of manufacturing cost assigned to Job
Particulars	Department D	Department E	Department K
Direct materials used	$168,000.00	$151,200.00	$93,600.00
Direct labor cost	$144,000.00	$132,000.00	$45,000.00
Manufacturing overhead applied	$115,200.00	$158,400.00	$72,940.00
Total Manufacturing Costs Assigned	$427,200.00	$441,600.00	$211,540.00