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4) Gercak Corporation has two production departments, Forming and Assembly. The company uses a job-order costing system and computes a predetermined overhead rate in each production department. The Forming Departments predetermined overhead rate is based on machine-hours and the Assembly Departments predetermined overhead rate is based on direct labor-hours. At the beginning of the current year, the company had made the following estimates: Forming Assembly Machine-hours 16,000 11,000 Direct labor-hours 2,000 7,000 Total fixed manufacturing overhead cost $100,800 $76,300 Variable manufacturing overhead per machine $ 1.70 hour Variable manufacturing overhead per direct $ 3.10 labor-hour During the current month the company started and finished Job X560. The following data were recorded for this job: Job X560 Forming Assembly Machine-hours 50 30 Direct labor-hours 30 40 Required:a. Calculate the estimated total manufacturing overhead for the Assembly Department.(4 pts) b. Calculate the predetermined overhead rate for the Forming Department.(4 pts) c. Calculate the total amount of overhead applied to Job X560 in both departments (4 pts)

Answer 1

Answer

a)

Estimated total manufacturing overhead for assembly department = Total Fixed Manufacturing Overhead cost for assembly department + (Variable manufacturing overhead per direct labor-hour * Direct labor-hours for assembly department)

= $76,300 + ( $3.10 * 7000)

= $76,300 + $21,700

= $98,000

b)

Predetermined overhead rate for the Forming Department = Estimated total manufacturing overhead cost for Forming Department / Estimated machine hours for Forming Department

Estimated total manufacturing overhead cost for Forming Department = Total fixed manufacturing overhead cost for Forming Department + ( Variable manufacturing overhead per machine-hour * Machine-hours for forming department)

= $100,800 + ($1.70 * 16,000)

​​​= $100,800 + $27,200

= $128,000

So, Predetermined overhead rate for Forming Department = $128,000 / 16,000

= $8.00 per machine-hour

c)

Total amount of overhead applied to Job X560 in both department = Amount of overhead applied to Forming Department for job X560 + Amount of overhead applied to Assembly Department for job X560

Amount of overhead applied to Forming Department for job X560 = Predetermined overhead rate for Forming Department * Number of Machine-hours used in forming department for Job X560

= $8.00 * 50

= $400.00

Amount of overhead applied to Assembly Department for Job X560 = Predetermined overhead rate for Assembly Department * Number of direct labor-hours used in Assembly Department for job X560

Predetermined overhead rate for Assembly Department = Estimated total manufacturing overhead cost for Assembly Department / Estimated direct labor-hours for Assembly Department

= $98,000 / 7000

= $14.00 per direct labor-hour

Amount of overhead applied to Assembly Department for job X560 = $14.00 * 40

= $560

Therefore,

Total amount of overhead applied to Job X560 in both department = Amount of overhead applied to Forming Department for job X560 + Amount of overhead applied to Assembly Department for job X560

= $400 + $560

= $960

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