Question

Vaughn 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 Manufacturing overhead Direct labor costs Direct labor hours Machine hours D $ 959,000 $ 1,370,000 100,000 400,000 $1,500,000 $1,250,000 125,000 500,000 к $720,000 $450,000 40,000 120,000 During January, the job cost sheets showed the following costs and production data Direct materials used Direct labor costs Manufacturing overhead incurred Direct labor hours Machine hours Department Ε $ 140,000 $126,000 $ 120,000 $ 110,000 $ 99,000 $ 124,000 8,000 11,000 34,000 45,000 к $ 78,000 $37,500 $ 79,000 3,500 10,410 Compute the predetermined overhead rate for each department. (Round answers to 2 decimal places, e.g. 12.50.) Overhead rate Department D Department E per direct labor hour Departments per machine hour

Answer 1

The answer has been presented in the supporting sheet. All the parts has been solved with detailed explanation and calculation. For detailed answer refer to the supporting sheet.

Answer Part 1) Overhead Rate of Department D = Manufacturing overheads / Direct Labour Cost * 100 = 959000/1370000*100 = 70 % Overheads rate of Department E = manufacturing overheads / direct labour hours = 1500000/125000 = $ 12 Per direct Labour hour Overhead rate of department K = manufacturing overheads /Machine hours = 720000/120000 = $ 6 Per machine Hour Overhead Rate Department D Department E - Department K 70% 12 Per direct labour hour 6 Per machine hour

-4 Part 2) 5 Overheads applied for department D 26 = direct labour cost * rate e7 = 120000*70% 28 = $84000 50 Overheads applied for department E 31 = direct labour hours * rate 32 = 11000 * 12 33 = $ 132000 15 Overheads applied for department K 16 = machine hours * rate 7 = 10410*6 18 = $62460 344000 Manufacturing Cost 11 Department D (140000+120000+84000) 12 Department E (126000+110000+132000) 13 Department K (78000+37500+62460) 368000 177960

44 45 Part 3) 46 Department D Overheads under applied / (overapplied) 47 = actual overheads - applied overheads 48 = 99000-84000 49 = $ 15000 Underapplied 51 Department E overheads under applied /(overapplied) 52 = actual overheads - applied overheads 53 = 124000-132000 54 = ($8000) overapplied 56 Department k overheads under applied / (overapplied) 57 = actual overheads - applied overheads 58 = 79000 - 62460 59 = $ 16540 under applied 60 Overhead Rate 62 Department D 15000 underapplied 63 Department E 8000 overapplied 64 Department 16540 underapplied 651