Question

Check My Wor 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 Pixed manufacturing overhead cost Variable manufacturing overhead per machine-hour Variable manufacturing overhead per direct labor-hour Department Molding Painting 12.000 60,000 70.000 8.000 $ 497,000 $ 615,000 $ 1.50 - $ 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 Machine-hours Direct materials Direct labor cost $ 770 $ 525 $1,332 $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? Complete this question by entering your answers in the tabs below. < Prev 3 of 3 Next >

Answer 1

SOLUTION:

Req. 1 Predetermined Overhead rate used in Molding Dept. = Fixed OH mfg. costs / machine hrs

   = $497,000 / 70,000

   = $7.10 Per MH

Predetermined OH rate used in Painting Dept. = Fixed OH mfg. costs / Direct labour hrs

= $615,000 / 60,000

= $10.25 Per DLH

Req. 2 Total OH costs applied to Job 205 can be computed as follows:

Job 205 Molding Dept. Painting Dept. Total Variable mfg. OH ($1.5*110) 165 165.00 Variable mfg. OH ($2.00*84) 168 168.00 Fixed Overhead cost 781 861 1,642.00 Total Overhead cost $ 1,975

Req. 3-a

Total manufacturing cost recorded can be computed as follows:

525 Job 205 Molding Dept. Painting Dept. Total Direct materials 770 1,332 2,102 Direct labor cost 1,470 1,995 Variable mfg. OH ($1.5*110) 165 165 Variable mfg. OH ($2.00*84) 168 168 Fixed Overhead cost 781 861 1,642 Total manufacturing cost $ 6,072

Req. 3-b Unit product cost = $6,072 / 50 = $121.44 (rounded off)

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