Question

Mason Company has two manufacturing departments—Machining and Assembly. The company considers all of its manufacturing overhead costs to be fixed costs. It provided the following estimates at the beginning of the year as well as the following information with respect to Jobs A and B:

Mason Company has two manufacturing departments-Machining and Assembly. The company considers all of its manufacturing overhead costs to be fixed costs. It provided the following estimates at the beginning of the year as well as the following information with respect to Jobs A and B: Estimated Data Manufacturing overhead Direct labor hours Machine hours Machining $18,032,000 28,000 644,000 Assembly $ 784,000 644,000 23,000 Total $18,816,000 672,000 667,000 Job A Direct labor hours Machine hours Machining Assembly 5 10 Total 15 13 11 Job B Direct labor hours Machine hours Machining Assembly 4 Total 12 15 Required: 1. If Mason Company uses a plantwide predetermined overhead rate with direct labor-hours as the allocation base, how much manufacturing overhead cost would be applied to Job A? Job B? (Round your answers to the nearest whole dollar amount.) 2. Assume that Mason Company uses departmental predetermined overhead rates. The Machining Department is allocated based on machine-hours and the Assembly Department is allocated based on direct labor-hours. How much manufacturing overhead cost would be applied to Job A? Job B? (Round your intermediate calculations and final answers to 2 decimal places.) 1. Manufacturing overhead applied Job A Manufacturing overhead applied Job B 2. Manufacturing overhead applied Job A Manufacturing overhead applied Job B

Answer 1

Req. 1
Plant wide predetermined overhead rate using direct labour hours as the allocation base
= Total Manufacturing overhead/Total Direct labour hours
= $18,816,000/ 672,000 hours
=$28 per direct labour hour
Description	Calculation
Manufacturing overhead applied Job A	= 15 hours X $28	= $420
Manufacturing overhead applied Job B	= 9 hours X $28	= $252
Req. 2
Maching Dept. overhead rate using machine hours as the allocation base
= Machining Dept. Manufacturing overhead/Machining Dept. Machine Hours
= $18,032,000/ 644,000 machine hours
=$28.00 per machine hour
Assembly Dept. overhead rate using direct labour hours as the allocation base
= Assembly Dept. Manufacturing overhead/Assembly Dept. Direct labour hours
= $784000/ 644000 hours
=$1.22 per direct labour hour
Description	Calculation
Manufacturing overhead applied Job A	= 11 hours X $28 + 10 Hours X1.22	= $320.20
Manufacturing overhead applied Job B	= 12 hours X $28 + 5 Hours X1.22	= $342.01