Question

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 39,500 52,808 83,000 32,000 $199,200 $501,600 $ 2.60 - $ 4.60 Job 205 was started on August 1 and completed on August 10. The company's cost records show the following information concerning the job: Department MoldingPainting 81 39e 71 $932 $1,280 $ 710 S 970 Direct labor-hours Machine-hours Direct materials Direct labor cost 126 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 21 units, what would be the unit product cost? Complete this question by entering your answers in the tabs below.

Answer 1

Ans. 1	Predetermined Overhead Rate
	Moding Department	$5.00	per MH
	Painting Department	$14.10	per DLH
	*Working Notes:
	MOLDING DEPARTMENT:
	Predetermined overhead rate = Total Estimated overhead cost / Estimated machine hours
		$415,000 / 83,000
		$5.00	per machine - hour
	*Calculations:
	*Variable manufacturing overhead = Variable manufacturing overhead per machine hour * Budgted machine hours
		$2.60 * 83,000
		$215,800
	*Total estimated overhead cost = Variable manufacturing overhead + Fixed manufacturing overhead
		$215,800 + $199,200
		$415,000
	PAINTING DEPARTMENT:
	Predetermined overhead rate = Total Estimated overhead cost / Estimated labor hours
		$744,480 / 52,800
		$14.10	per labor - hour
	*Calculations:
	*Variable manufacturing overhead = Variable manufacturing overhead per labor hour * Budgted labor hours
		$4.60 * 52,800
		$242,880
	*Total estimated overhead cost = Variable manufacturing overhead + Fixed manufacturing overhead
		$242,880 + $501,600
		$744,480
Ans. 2	Molding Department:
	*Overhead cost applied = Predetermined overhead rate * Actual direct labor hours
		$5 * 390
		$1,950
	Painting Department:
	*Overhead cost applied = Predetermined overhead rate * Actual direct labor hours
		$14.10 * 126
		$1,777	(rounded off)
	Total overhead cost   =   Molding department overhead applied + Painting department overhead applied
		$1,950 + $1,777
		$3,727
Ans. 3 a		Molding	Painting	Total
	Direct materials	$932.00	$1,280.00
	Direct labor cost	$710.00	$970.00
	Overhead applied	$1,950.00	$1,777.00
	Total manufacturing cost	$3,592.00	$4,027.00	$7,619.00
Ans. 3 b	Unit product cost = Total manufacturing cost / Units produced
		$7,619 / 21
		$362.81	per unit