Question

Kody Corporation uses a job-order costing system with a plantwide overhead rate based on machine-hours. At the beginning of the year, the company made the following estimates:

Machine-hours required to support estimated production		153,000
Fixed manufacturing overhead cost	$	659,000
Variable manufacturing overhead cost per machine-hour	$	4.40

1. Compute the predetermined overhead rate. (Do not round intermediate calculations. Round your answer to 2 decimal places.)

2. During the year Job 500 was started and completed. The following information was available with respect to this job:

Direct materials requisitioned	$	330
Direct labor cost	$	200
Machine-hours used		39

3. Compute the total manufacturing cost assigned to Job 500. (Round your intermediate calculations and final answer to 2 decimal places.)

3-a. During the year the company worked a total of 145,100 machine-hours on all jobs and incurred actual manufacturing overhead costs of $1,268,821. What is the amount of underapplied or overapplied overhead for the year? (Round your intermediate calculations to 2 decimal places.)

Answer 1

1. Given ,

Variable manufacturing overhead cost per machine-hour = $4.40

Fixed manufacturing overhead cost per machine-hour = $659,000/153,000 = $4.31

==> Predetermined overhead rate = $4.40+$4.30 = $8.71 per machine hour.

3.

Job 500
Direct materials	$330
Direct labor	$200
Applied overhead*	$339.69
Total Cost	$869.69

*Applied overhead = $8.71 X 39 = $339.69

3.a

Actual overhead costs = $1,268,821

Applied overhead costs = $8.71 X 145,100 = $1,263,821

==> Overhead cost $5,000 is Underapplied