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 31,000 52,900 81,000 36,000 $ 202,500 $486,680 $ 2.80 - $ 4.80 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 134 400 $ 948 $ 1.100 $710 $ 960 Direct labor-hours Machine-hours Direct materials Direct labor cost 66 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 30 units, what would be the unit product cost?

Answer 1

1	Predetermined overhead rate
	Molding Department
	Fixed manufacturing overhead cost (202,500/81,000)=					2.5
	Variable manufacturing overhead rate per machine hour					2.8
	Predetermined overhead rate					5.3	per MH's
	Painting Department
	Fixed manufacturing overhead cost (486,680/52900)=					9.2
	Variable manufacturing overhead rate per machine hour					4.8
	Predetermined overhead rate					14	per DLH
2)	total overhead cost applied ot job 205
					Molding	painting	total
	Molding	(400*5.3)			2120		2120
	Painting	(134*14)				1876	1876
	total				2120	1876	3996
	total overhead cost applied to job 205				3996
3-a)	total manufacturing cost
					Molding	painting	total
	Direct materials				948	1100	2048
	Direct labor cost				710	960	1670
	overhead cost applied				2120	1876	3996
	total				3778	3936	7714
	total manufacturing cost			$7,714
3-b)	unit product cost =		7714/30
			257.13