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 2020, the following estimates were made for the year. Department D Manufacturing overhead Direct labor costs Direct labor hours Machine hours $945,000 $1,350,000 100,000 400,000 $1,750,000 $1,250,000 125,000 500,000 $1,080,000 $450,000 40,000 120,000 During January, the job cost sheets showed the following costs and production data. Direct materials used Direct labor costs Manufacturing overhead incurred Direct labor hours Machine hours Department DE $140,000 $126,000 $120,000 $110,000 $99,000 $124,000 8,000 11,000 34,000 45,000 к $78,000 $37,500 $118,500 3,500 10,460

Answer 1

1) Overhead rate

	Overhead rate
Department D	945000/1350000 = 70% of labor cost
Department E	1750000/125000 = 14 per labor hour
Department K	1080000/120000 = 9 per machine hour

2) Total manufacturing cost

	Manufacturing cost
Department D	140000+120000+120000*70% = 344000
Department E	126000+110000+11000*14 = 390000
Department K	78000+37500+10460*9 = 209640

3) Over /Under applied overhead

	Over/Under applied
Department D	84000-99000 = 15000	Under applied
Department E	124000-154000 = 30000	Over applied
Department K	118500-94140 = 24360	Under applied