Question

Joy Enterprises ?YE) uses a job costing system that requires the annual calculation of predetermined rates for its manufacturing overhead costs. Most jobs completed by DCE involve production activities in two departments, Machining and Assembly. Selected budgeted and actual data for 2016 are presented below as well as cost data for a particular job, #K-326, that was started and completed during 2016. Budgeted manufacturing overhead Actual manufacturing overhead Budgeted direct labor hours Budgeted machine hours Machining $400,000 $385,000 6,600 50,000 7,150 51,500 Assembly $300,000 5312,000 25,000 5,000 26,200 5,200 ACTUAL direct labor hours ACTUAL machine hours Job K-326 Direct materials cost $12,875 Direct labor cost: Machining (14 hrs @ $20 per hour) $280 Assembly (60 hours @$24 per hour) Machine hours used: $1,440 Machining Assembly Number of units in job K-326 1,150 hrs 35 hrs 220 units that JYE calculates departmental manufacturing overhead rates in each of its two Assume production departments. In Machining, the allocation base for manufacturing overhead in machine hours; in Assembly, the allocation base for manufacturing overhead is direct labor hours. Using the information above, answer questions 1-3 on the next page

Answer 1

1. Calculation of Predetremined Manufacturing Overhead Rate

Predetremined Manufacturing Overhead Rate = Budgeted Manufacturing Overhead/Budgeted Cost driver relevant to the departement

	Machining	Assembly
Budgeted Manufaturing Overhead	400,000	300,000
Budgeted Labor Hours	6,600	25,000
Budgeted Machine Hours	50,000	5,000
Predetermined Manufacturing Overhead Rate	8.00	12.00

2.

Total Cost of Job K-326
Direct Material		12,875.00
Direct Labor Hours
Machining (14hrs @ $20 per hr)	280.00
Assembly (60 hours @ 24 per hr)	1,440.00
Total Labor Cost		1,720.00
Overhead allocated
Machining ($8*1150 hrs)	9,200.00
Assembly ($12 * 35 hrs)	420.00
Total Overhead allocated		9,620.00
Total Cost of Job K-326		24,215.00
No of units produced		220
Cost per unit		110.07

3.

	Machining	Assembly
Actual Manufaturing Overhead	385,000	312,000
Actual Labor Hours	7,150	26,200
Actual Machine Hours	51,500	5,200
Actual Manufacturing Overhead Rate	7.5	11.9

Allocation to Job K-326	Machining	Assembly
Actual Labor Hours	1150
Actual Machine Hours		35
Rate	7.5	11.9
Total Cost	8,597.09	416.79
Overhead applied	9,200.00	420.00
Difference	602.91	3.21
	Overapplied	Overapplied

For JYE as a whole
	Machining	Assembly
Predetermined Manufacturing Overhead Rate	8.00	12.00
Actual Labor Hours	7,150	26,200
Actual Machine Hours	51,500	5,200
Overhead applied	412,000	314,400
Actual Manufaturing Overhead	385,000	312,000
Difference	27,000	2,400
	Overapplied	Overapplied