Question

The Corporation has two production departments, Casting and Finishing. 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 Finishing 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:

	Casting		Finishing
Machine-hours		17,000		7,000
Direct labor-hours		2,000		15,000
Total fixed manufacturing overhead cost	$	105,400	$	52,800
Variable manufacturing overhead per machine-hour	$	1.70
Variable manufacturing overhead per direct labor-hour			$	3.90

Below is actual information related to Job 215 for the period:

                                                                                                Casting            Finishing

Actual machine-hours                                                             325                  40

Actual direct labor-hours                                                        50                    120

Direct materials                                                                       $1,200             $530

Direct labor                                                                             $500                $960

Please compute the total product cost of Job 215.

Answer 1

Casting overhead rate = (105400/17000+1.7) = 7.9 per MH

Finishing overhead rate = (52800/15000)+3.9 = 7.42 per DLH

Calculate total product cost

Direct material (1200+530)	1730
Direct labor (500+960)	1460
Casting overhead (325*7.9)	2567.50
Finishing overhead (120*7.42)	890.40
Total Product cost	6647.90 or 6648