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: 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 37,000 51,389 83,000 39,800 $199,200 $456,578 $ 2.60 - 5 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 Molding Painting 74 132 33e 65 Direct labor-hours Machine-hours Direct materials Direct labor cost $942 $ 710 $1,240 $ 980 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 2052 3-b. If the job contained 38 units, what would be the unit product cost?

1

Answer 1

1. Calculation of departmental overhead rates

Molding department = $2.60 + ( $199200/83000) = $5 per machine hour

Painting department = $4.60 + ($456570/51300) = $13.5 per labor hour

2. Total overhead cost applied

= (330*$5) + (132*$13.5)

= $3432

3. Total cost of job

= Material + labor + overhead

Particulars	Moulding	Painting	Total
Material	$942	$1240	$2182
Labor	$710	$980	$1690
Overhead	$1650	$1782	$3432
Total	$3302	$4002	$7304

4. Unit product cost = $7304/38 units

= $192.21

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