Question

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Problem 2-19 Multiple Predetermined Overhead Rates; Applying Overhead (LO2-1, LO2-2, LO2-4) High Desert Potteryworks makes a variety of pottery products that it sells to retailers. The company uses a job-order costing system in which departmental predetermined overhead rates are used to apply manufacturing overhead cost to jobs. The predetermined overhead rate in the Molding Department is based on machine-hours, and the rate in the Painting Department is based on direct labor- hours. At the beginning of the year, the company provided the following estimates: Direct labor-hours Machine-hours Fixed manufacturing overhead cost Variable manufacturing overhead per machine-hour Variable manufacturing overhead per direct labor-hour Department Molding Painting 33,000 54,400 85,000 33,000 $178,500 $484,160 $ 3.00 - $ 5.00 Job 205 was started on August 1 and completed on August 10. The company's cost records show the following information concerning the job: Direct labor-hours Machine-hours Direct materials Direct labor cost Department MoldingPainting 79129 37073 $ 940 $1,120 $ 720 $1,010 Required: 1. Compute the predetermined overhead rates used in the Molding Department and the Painting Department. 2. Compute the total overhead cost applied to Job 205. 3-a. What would be the total manufacturing cost recorded for Job 205? 3-b. If the job contained 25 units, what would be the unit product cost?

Answer 1

1.Predetermined Overhead rate Add Estimated Fixed manfacturing Overhead Estimated variable manfacturing Overhead Estimated Total manfacturing Overhead (a) Estimated Total machine hours Pre determined Overhead rate (a)/(b) Molding Dept 178,500 $ 255,000 85000 x 3.00 433,500 85,000 $ 5.10 Per MH $ (b) Add $ Estimated Fixed manfacturing Overhead Estimated variable manfacturing Overhead Estimated Total manfacturing Overhead (a) Estimated Total Direct Labor Hour (b) Pre determined Overhead rate (a)/(b) Painting Dept 484,160 272,000 54400 x 5.00 $ 756,160 54,400 13.90 Per DLH Calculate estimated manufacturing overhead in each dept and than divide with estimated machine hours to calculate predetermined rate in Molding Dept and Divide by estimated Direct labor hour for Painting Dept. 2. Overhead cost applied to Job 250 $ Molding Dept Overhead applied (370 MH x 5.10 per MH) Painting Dept Overhead applied (129 DLH x 13.90 per DLH) Total Overhead Cost $ 1,887 1,793 3,680 $ 3 a. Total Manufacturing cost of Job 250 Direct Material Direct Labor Manufacturing Overhead Total Cost Molding Dept Painting Dept Total 940 $ 1,120 $ 2,060 $ 720 $ 1,010 $ 1,730 $ 1,887 $ 1,793 $ 3,680 $ 3,547 $ 3,923 $ 7,470 3 b. Unit Product cost of Job 250 $ Total Manufacturing Cost Number of Units Unit Product cost (b) (a)/(b) 7,470 25 units 298.80 Per unit $