Question

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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 34,000 56,600 82,000 35,000 $172,200 $515,060 $ 3.20 - $ 5.20 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 84 127 350 66 $ 938 $1,120 $ 680 $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 22 units, what would be the unit product cost?

Answer 1

Compute Predetermine overhead rate: Molding Department: Fixedmanufacturing overhead cost Fixed Predetermine overhead rate = = Machine hours $172,200 82.000 hrs = $2.1 per machine hour Variable overhead rate = $3.20 Predetermine overhead rate = $2.1 + $3.20 = $5.30 per machine hour Painting Department:

Fixed manufacturing overhead cost Fixed Predetermine overheadrate= Machine hours $515,060 56.600 hrs = $9.1 per direct labor Variable overhead rate = $5.20 Predetermine overhead rate = $9.1 + $5.20 = $14.3 per direct labor

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2.

Calculate Total Overhead cost applies to Job 205
Molding Department (350 machine hrs × $5.30)	$1,855
Painting Department (127 DLH × $14.3)	$1,816
Total Overhead cost	$3,671

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3

a)

Calculate Total Manufacturing Cost:
Direct material ($938 + $1120)	$2,058
Direct labor ($680 + $1010)	$1,690
Manufacturing overhead	$3,671
Total Manufacturing cost	$7,419

b)

Unit product cost = $7419/22 = $337.22 per unit