Question

Problem 15-04A 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 Manufacturing overhead Direct labor costs Direct labor hours Machine hours $770,000 $1,100,000 150,000 600,000 $1,500,000 $1,875,000 125,000 750,000 $780,000 $675,000 60,000 120,000 During January, the job cost sheets showed the following costs and production data. Department Direct materials used Direct labor costs Manufacturing overhead incurred Direct labor hours Machine hours $210,000 $180,000 $148,500 12,000 51,000 $189,000 $165,000 $186,000 16,500 67,500 $117,000 $56,250 $118,500 5,250 10,480

Answer 1

1) Overhead rate :

Department D = 770000/1100000 = 70% of direct labor cost

Department E = 1500000/125000 = 12 per direct labor hour

Department K = 780000/120000 = 6.50 per machine hour

2) Total manufacturing cost

Department D (210000+180000+180000*70%)	516000
Department E (189000+165000+16500*12)	552000
Department K (117000+56250+10480*6.50)	241370

3) Calculate overhead

Department D (126000-148500)	22500 Under applied
Department E (198000-186000)	12000 over applied
Department K (68120-118500)	50380 under applied