Question

Bierce Corporation has two manufacturing departments--Machining and Finishing. The company used the following data at the beginning of the year to calculate predetermined overhead rates:

	Machining		Finishing		Total
Estimated total machine-hours (MHs)		9,000		8,000		17,000
Estimated total fixed manufacturing overhead cost	$	18,000	$	7,800	$	25,800
Estimated variable manufacturing overhead cost per MH	$	2.70	$	5.00

During the most recent month, the company started and completed two jobs--Job B and Job K. There were no beginning inventories. Data concerning those two jobs follow:

	Job B		Job K
Direct materials	$	21,200	$	7,800
Direct labor cost	$	21,000	$	2,500
Machining machine-hours		5,000		4,000
Finishing machine-hours		1,000		7,000

Required:

a. Assume that the company uses a plantwide predetermined manufacturing overhead rate based on machine-hours. Calculate that overhead rate. (Round your answer to 2 decimal places.)

b. Assume that the company uses a plantwide predetermined manufacturing overhead rate based on machine-hours. Calculate the amount of manufacturing overhead applied to Job B. (Do not round intermediate calculations.)

c. Assume that the company uses a plantwide predetermined manufacturing overhead rate based on machine-hours. Calculate the amount of manufacturing overhead applied to Job K. (Do not round intermediate calculations. Round your answer to the nearest whole dollar amount.)

d. Assume that the company uses departmental predetermined overhead rates with machine-hours as the allocation base in both departments. What is the departmental predetermined overhead rate in the Machining department? (Round your answer to 2 decimal places.)

e. Assume that the company uses departmental predetermined overhead rates with machine-hours as the allocation base in both production departments. What is the departmental predetermined overhead rate in the Finishing department? (Round your answer to 2 decimal places.)

f. Assume that the company uses departmental predetermined overhead rates with machine-hours as the allocation base in both production departments. How much manufacturing overhead will be applied to Job B? (Do not round intermediate calculations.)

g. Assume that the company uses departmental predetermined overhead rates with machine-hours as the allocation base in both production departments. How much manufacturing overhead will be applied to Job K?. (Do not round intermediate calculations.)

Answer 1

Answer -

a) Calculation of the plantwide predetermined overhead rate -

Estimated total fixed manufacturing overhead cost - $25,800

Estimated variable manufacturing overhead of Machining = Estimated machine-hours (MHs) × variable manufacturing overhead cost per MH

Estimated variable manufacturing overhead of Machining = 9,000 MHs × $2.70

Estimated variable manufacturing overhead of Machining = $ 24,300

Estimated variable manufacturing overhead of Finishing = 8,000 MHs × $ 5.00 = $40,000

Estimated total manufacturing overhead cost =Estimated total fixed manufacturing overhead cost +Estimated variable manufacturing overhead of Machining + Estimated variable manufacturing overhead of Finishing

Estimated total manufacturing overhead cost = $25,800 +$24,300 + $40,000 = $90,100

Estimated total machine-hours (MHs) = 17,000

Predetermined overhead rate =Estimated total manufacturing overhead cost /Estimated total machine-hours (MHs)

Predetermined overhead rate = $90,100/17,000

Predetermined overhead rate = $5.3

b) Calculation of manufacturing overhead applied to Job B -

Overhead applied to a Job B = Predetermined overhead rate x Machine-hours incurred by the job B

Predetermined overhead rate = $5.3

Machine-hours incurred by the job B =Machining machine-hours + Finishing machine-hours

Machine-hours incurred by the job B = 5000 + 1000 = 6000

Manufacturing overhead applied to Job B = $5.3 × 6000

Manufacturing overhead applied to Job B = $31,800

c)Calculation of manufacturing overhead applied to Job K -

Manufacturing Overhead applied to a job K = Predetermined overhead rate × Machine-hours incurred by the job K

Predetermined overhead rate = $5.3

Machine-hours incurred by the job K =Machining machine-hours + Finishing machine-hours

Machine-hours incurred by the job = 4000 + 7000 =11000

Manufacturing overhead applied to Job K = $5.3 × 11000

Manufacturing overhead applied to Job K = $58,300

d) Calculation of departmental predetermined overhead rate in the Machining department :-

Estimated fixed manufacturing overhead of Machining - $18,000

Estimated variable manufacturing overhead of Machining = Estimated machine-hours (MHs) × variable manufacturing overhead cost per MH

Estimated variable manufacturing overhead of Machining = 9,000 MHs × $2.70

Estimated variable manufacturing overhead of Machining = $ 24,300

Estimated total manufacturing overhead cost of Machining =Estimated total fixed manufacturing overhead cost +Estimated variable manufacturing overhead of Machining

Estimated total manufacturing overhead cost = $18,000 + $24,300

Estimated total manufacturing overhead cost = $42,300

Estimated machine-hours (MHs) of Machining = $9,000

Departmental predetermined overhead rate in the Machining = Estimated total manufacturing overhead cost / Estimated machine-hours (MHs) of Machining

Departmental predetermined overhead rate in the Machining = $42,300 / $9,000

Departmental predetermined overhead rate in the Machining = $4.7 per MHs

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