Question

High Desert Potteryworks makes a variety of pottery products that it sells to retailers such as Home Depot The company uses a job-order costing system in which predetermined overhead rates are used to apply manufacturing overhead cost to jobs. The predetermined overhead rate in the Molding Department is based on machine-hours, and the rate in the Painting Department is based on direct labor-hours. At the beginning of the year, the company's management made the following estimates: Department Direct labor-hours Machine-hours Direct materials cost Direct labor cost Fixed manufacturing overhead cost Variable manufacturing overhead per machine-hour Variable manufacturing overhead per direct labor- hour Molding 30,500 81,000 $185.000 $271.000 $218,700 $2.60 Painting 51,300 38.000 $ 195,000 $526.000 $471,960 $4.60 Job 205 was started on August 1 and completed on August 10. The company's cost records show the following information concerning the job: Department Molding Painting Direct labor-hours 71 130 Machine-hours 300 74 Materials placed into production $944 $1,140 Ditect labor cost $720 $960 Required: 1. Compute the predetermined overhead rate used during the year in the Molding Department Compute the rate used in the Painting Department. (Round your answers to 2 decimal places.) Predetermined overhead rate Molding Department Painting Department per DLH per MH 2. Compute the total overhead cost applied to Job 205. (Round "Predetermined overhead rate" to 2 decimal places, other intermediate calculations and final answers to the nearest dollar amount.) Total overhead cost

Answer 1

Requirement 1:

Departmental predetermined overhead rate = Departmental overhead cost / Base Quantity

Molding Department:

Overhead cost = (81,000 machine hours * $2.60) + $218,700 = $429,300

Machine hours = 81,000

Predetermined overhead rate = $429,300 / 81,000 machine hours = $5.30 per MH

Painting Department

Overhead cost = (51,300 machine hours * $4.60) + $471,960 = $707,940

Direct labor hours = 51,300

Predetermined overhead rate = $707,940 / 51,300 direct labor hours = $13.80 per DLH

Requirement 2:

Total Overhead cost applied to Job 205

Molding department overheads = 300 machine hours * $5.30 per machine hour = $1,590

Painting department overheads = 130 direct labor hours * $13.80 per direct labor hour = $1,794

Total Overhead cost applied to Job 205 = $1,590 + $1,794 = $3,384

Requirement 3a:

Particulars

Department

	Molding	Painting	Total
Direct Materials	$944	$1,140	$2,084
Direct Labor	$720	$960	$1,680
Manufacturing overheads	$1,590	$1,794	$3,384
Total Cost	$3,254	$3,894	$7,148

Requirement 3b:

Unit Product cost = Total Product cost / Units Produced

Unit Product cost = $7,148 / 34 Units = $210.24 per unit

Requirement 4:

Molding Department	Underapplied overhead	$11,200
Painting Department	Overapplied overhead	$37,600

Working Notes:

Molding Department

Applied manufacturing overheads = 80,700 machine hours * $5.30 per machine hour = $427,710

Actual manufacturing overheads = $438,910

Underapplied manufacturing overheads = $438,910 - $427,710 = $11,200

Painting Department

Applied manufacturing overheads = 52,000 labor hours * $13.80 per direct labor hour = $717,600

Actual manufacturing overheads = $680,000

Overapplied manufacturing overheads = $717,600 - $680,000 = $37,600

All the best...