Question

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:

	Department
	Molding			Painting
Direct labor-hours		12,000			60,000
Machine-hours		70,000			8,000
Fixed manufacturing overhead cost	$	497,000		$	615,000
Variable manufacturing overhead per machine-hour	$	1.50			-
Variable manufacturing overhead per direct labor-hour		-		$	2.00

Job 205 was started on August 1 and completed on August 10. The company's cost records show the following information concerning the job:

	Department
	Molding			Painting
Direct labor-hours		30			84
Machine-hours		110			20
Direct materials	$	770		$	1,332
Direct labor cost	$	525		$	1,470

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 50 units, what would be the unit product cost?

Answer 1

Calculation of pre determined overhead rate
	Molding	Painting
Fixed manufacturing overhead cost	497,000	615,000
Direct labor hours	12,000	60,000
Machine hours	70,000	8,000
Fixed manufacturing overhead rate	7.10	10.25
Variable manufacturing overhead rate	1.50	2.00
Pre determined overhead rate	8.60	12.25
2.Overhead cost applied = 110*8.6 + 84*12.25	1975
3.Total manufacturing cost
Direct material	2,102
Direct Labor	1,995
Overhead cost	1,975
Total manufacturing cost	6,072
3-B Unit product cost = 6072/50 = $121.44