Question

Agassi Company uses a job order cost system in each of its three manufacturing departments. Manufacturing overhead is applied to jobs on the basis of direct labor cost in Department D, direct labor hours in Department E, and machine hours in Department K. In establishing the predetermined overhead rates for 2020, the following estimates were made for the year. D Manufacturing overhead Direct labor costs Direct labor hours $1,240,000 $1,550,000 120,000 480,000 Department E $1,625,000 $1,500,000 125,000 600,000 K $1,020,000 $540,000 48,000 120,000 Machine hours During January, the job cost sheets showed the following costs and production data. D Direct materials used Direct labor costs Manufacturing overhead incurred Direct labor hours Machine hours $168,000 $144,000 $118.800 9,600 40,800 Department E $151,200 $132,000 $148,800 13,200 54,000 K $93,600 $45,000 $94.800 4,200 10,330 Compute the predetermined overhead rate for each department. (Round answers to 2 decimal places, e.g. 12.50 or 12.50%.) Overhead rate Department D % Department E $ per direct labor hour Department K $ per machine hour e Textbook and Media

Answer 1

Required 1:

Department	Calculations	Overhead rate	Basis
D	(1,240,000/1,550,000)*100	80%	Direct labor cost
E	(1,625,000 / 125,000)	$13	Direct labor hours
K	($1,020,000 / 120,000)	$8.5	Machine hours

Required 2:

Department	Direct materials	Direct labor	Overhead	Total manufacturing cost
D	$168,000	$144,000	$115,200 (144,000*80%)	$427,200
E	$151,200	$132,000	$171,600 (13,200*$13)	$454,800
K	$93,600	$45,000	$87,805 (10,330*$8.5)	$226,405

Required 3:

Department	Actual	Applied	Over / Under applied
D	$118,800	$115,200	($3,600)
E	$148,800	$171,600	$22,800
K	$94,800	$87,805	($6,995)