Question

Duck Company has two production departments, Casting and Customizing. The company uses a job-order costing system and computes a predetermined overhead rate in each production department. The Casting Department's predetermined overhead rate is based on machine-hours and the Customizing Department's predetermined overhead rate is based on direct labor-hours. At the beginning of the current year, the company had made the following estimates: Machine-hours Direct labor-hours Total fixed manufacturing overhead cost Variable manufacturing overhead per machine-hour Variable manufacturing overhead per direct labor-hour Casting 14,600 5,200 $116,800 $ 1.60 Customizing 12,600 6,300 $49,770 $ 3.10 During the current month the company started and finished Job T138. The following data were recorded for this job: Job T138: Machine-hours Direct labor-hours Casting Customizing 70 40 14 80 The amount of overhead applied in the Customizing Department to Job T138 is closest to: (Round your intermediate calculations to 2 decimal places.)

Answer 1

Answer

• Amount of Overhead applied in the CUSTOMIZING DEPARTMENT to Job T138
  = $ 880 [Answer]
• Working

		Casting	Customization
A	Total Fixed manufacturing overhead cost	$116,800	$49,770
B	Allocation base: machine hours and DLHs	14600	6300
C = A/B	Fixed overhead rate	$8.00	$7.90
D	Variable overhead rate	$1.60	$3.10
E = C+D	Departmental Overhead rate	$9.60	$11.00
	Allocation base for Job T138:
F	Machine hours	70
G	Direct labor hours		80
H = E x F and E x G	Amount of Overhead applied	$672	$880 [Answer]