Question

Agass 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 E Manufacturing overhead Direct labor costs Direct labor hours Machine hours $1,170,000 $1,462,500 100,000 400,000 $1,625,000 $1,250,000 125.000 500,000 $720,000 $450,000 40.000 120,000 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 $140,000 $120,000 $99,000 8,000 34,000 $126,000 $110,000 $124.000 13,000 45,000 $78,000 $37.500 $70,000 3.500 10,430 Compute the predetermined overhead rate for each department. (Round ansive Overhead rate Department Department E per direct labor hour Department K per machine hour Compute the total marvsfacturing costs assigned to jobs in Januar Manufacturing Costs Department Activate Windows Department Department A 4 20 20

Answer 1

Answer:

Here, Manufacturing Overhead are applied to jobs based on

Direct Labor Cost = Department D

Direct Labor hours = Department E

Machine hours = Department K

Computation of Predetermined Overhead rates

Department D = Estimated Manufacturing overhead / Estimated Direct labor cost

                       = $1,170,000 / $1,462,500

                       = 80%

Department E = Estimated Manufacturing overhead / Estimated Direct labor hours

                        = $1,625,000 / 125,000

                        = $13 per direct labor hour

Department K = Estimated Manufacturing overhead / Estimated Machine hours

                       = $720,000 / 120,000

                       = $6 per machine hour

Overhead Rate
Department D	80%
Department E	$13 per direct Labor Hour
Department K	$6 per Machine hour

Computation of total manufacturing costs assigned to Jobs

Manufacturing cost = Direct material used + Direct Labor cost + Manufacturing overheads assigned

Department D = $140,000 + $120,000 + 80% of Direct Labor cost

                       = $260,000 + ($120,000 * 80%)

                       = $260,000 + $96,000

                       = $356,000

Department E = $126,000 + $110,000 + ($13 per direct labor hour * 11,000 direct labor hours)

                       = $236,000 + $143,000

                       = $379,000

Department K = $78,000 + $37,500 + ($6 per machine hour * 10,430 machine hours)

                        = $115,500 + $62,580

                        = $178,080

Manufacturing Costs
Department D	$356,000
Department E	$379,000
Department K	$178,080

Computation of under or over applied overheads to Jobs

Here, Overheads applied are taken from figures arrived while computing manufacturing cost.

Department D = Overheads applied - Actual overheads incurred

                       = $96,000 - $99,000

                       = $3,000 under applied

Department E = Overheads applied - Actual overheads incurred

                       = $143,000 - $124,000

                       = $19,000 over applied

Department K = Overheads applied - Actual overheads incurred

                       = $62,580 - $79,000

                       = $16,420 Under applied

Manufacturing Overhead
Department D	$3,000	Under applied
Department E	$19,000	Over applied
Department K	$16,420	Under applied