Question

Question 2(lob casting accounting for Marks) anufacturing overhead) 125 The Matthew Company uses a normal job-costing system at its Minneapolis plant. The plant has a machining department and an assembly department. Its job- costing system has two direct-cost categories (direct materials and direct manufacturing labor) and two manufacturing overhead cost pools (the machining department overhead, allocated to jobs based on actual machine hours, and the assembly department overhead, allocated to jobs based on actual direct manufacturing labor costs). The 2017 budget for the plant is as follows: Manufacturing warhead Direct manufacturing labor costs Direct manufacturing labor hours Machine-hours Machining Department $1,500,000 $1,600.000 120.000 30.000 Assembly Departemen $5,100,000 $9.000.000 280.000 270.000 Required: 1.Compute the budgeted manufacturing overhead rate for each department. 2.During February, the job-cost record for Job 494 contained the following Machining Department $12.00 $15.000 Assembly Department SRO $19.000 Direct materials ad Direct manufacturing labor

Answer 1

1. Computation of budgeted manufacturing rate for each department:

Given information

	Machining department	Assembly department
Manufacturing overhead costs	$1,500,000	$5,100,000
Direct manufacturing labor costs	$1,600,000	$3,000,000
Direct manufacturing labor hours	120,000	280,000
Machine hours	30,000	270,000

Machine department overheads are allocated on the basis of actual machine hours and

Assembly department overheads are allocated on the basis of actual direct manufacturing labour costs.

Budgeted manufacturing overhead rate for Machining department = Manufacturing overhead costs / actual machine hours

= $1,500,000 / 30,000 hours = $50 per machine hour

Budgeted manufacturing overhead rate for Assembly department = Manufacturing overhead costs / actual direct manufacturing labour costs.

= $5,100,000 / $3,000,000 = $1.70

2. Computation of total manufacturing overhead costs allocated to Job 494:

Given information relating to Job 494

	Machining department	Assembly department
Direct materials used	$42.000	$78,000
Direct manufacturing labor costs	$15,000	$19,000
Direct manufacturing labor hours	1,100	1,300
Machine hours	2,800	1,100

Machining department Manufacturing overhead cost allocated to Job 494 is

= Budgeted manufacturing overhead rate for Machining department x actual machine hours

= $50 x 2,800 hours = $140,000

Assembly department Manufacturing overhead cost allocated to Job 494 is

= Budgeted manufacturing overhead rate for Assembly department x Direct manufacturing labor cost

= $1.70 x $19,000 = $32,300

Total manufacturing overhead costs allocated to Job 494 = $140,000 + $32,300 = $172,300

3. Computation of over or under-allocated manufacturing overhead for each department:

Applied manufacturing overhead costs to Machining department = Actual machine hours x Budgeted overhead rate

= 33,000 hours x $50 per machine hour = $1,650,000

Applied manufacturing overhead costs to Assembly department = Actual direct manufacturing labour cost x Budgeted overhead labour rate

= $3,200,000 x $1.70 = $5,440,000

	Machining department	Assembly department
A. Actual Manufacturing overhead costs	$1,800,000	$5,300,000
B. Applied manufacturing overhead costs	$1,650,000	$5,440,000
C. Over or (Under) allocation of manufacturing overhead (B - A)	($150,000)	$140,000

Under-allocation of manufacturing overhead for Machining department by $150,000

Over-allocation of manufacturing overhead for Assembly department by $140,000.