Question

8 Sweeten Company had no jobs in progress at the beginning of March and no beginning inventories. The company has two manufacturing departments-Molding and Fabrication. It started, completed, and sold only two jobs during March- Job P and Job Q. The following additional information is available for the company as a whole and for Jobs P and Q (all data and questions relate to the month of March); Estimated total machine-hours used Estimated total fixed manufacturing overhead Estimated variable manufacturing overhead per machine-hour Molding Fabrication Total 2,500 1,500 4,000 $10,000 $ 15,000 $25,000 $ 1.40 $ 2.20 Job P $13,000 $21,000 Job O $8,000 $7,500 Direct materials Direct labor cost Actual machine-hours used: Molding Fabrication Total 1,700 600 2,300 800 900 1,700 Sweeten Company had no underapplied or overapplied manufacturing overhead costs during the month. Required: For questions 1-8, assume that Sweeten Company uses a plantwide fredetermined overhead rate with machine-hours as the allocation base. For questions 9-15, assume that the company uses departmental predetermined overhead rates with machine-hours as the allocation base in both departments.

Answer 1

Computation of Plantwide Predetermined Overhead Absorption Rate:

Plantwide Overhead Absorption Rate = Total overheads for the factory / Total number of units of base for the factory

Calculation of total estimated factory/manufacturing overheads:

Estimated total fixed manufacturing overheads = $10,000 + $15,000 = $25,000

Estimted total variable manufacturing overheads = Variable cost per machine hour * Estimated Machine hours used

Molding   = $1.40 * 2,500 = $ 3,500

Fabrication = $2.20 * 1,500 = $ 3,300

Total estimated variable manufacturing overheads = $3,500 + $3,300 = $6,800

Total estimated manufacturing overheads = Estimated total fixed manufacturing overheads + Estimted total variable manufacturing overheads

= $25,000 + $6,800

= $31,800

Total estimated machine hours for the factory = 2,500 + 1,500 = 4,000

Therefore,

Predetermined plantwide estimated overhead absorption rate = Total estimated manufacturing overheads / Total estimated machine hours for the factory

= 31,800 / 4000

= $7.95 per machine hour