Question

Eisentrout Corporation has two production departments, Machining and Customizing. The company uses a job-order costing system and computes a predetermined overhead rate in each production department. The Machining Department’s predetermined overhead rate is based on machine-hours and the Customizing 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: Machining Customizing Machine-hours 16,000 11,000 Direct labor-hours 2,000 6,000 Total fixed manufacturing overhead cost $ 104,000 $ 56,400 Variable manufacturing overhead per machine-hour $ 2.10 Variable manufacturing overhead per direct labor-hour $ 3.30 During the current month the company started and finished Job T272. The following data were recorded for this job: Job T272: Machining Customizing Machine-hours 60 30 Direct labor-hours 10 60 The estimated total manufacturing overhead for the Machining Department is closest to: A) 33600 B) 104000 C) 310933 D) 137600

Answer 1

Answer: D. $137,600

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Note: The Machining Department’s predetermined overhead rate is based on machine-hours.

Computation of the estimated total manufacturing overhead for the Machining Department:
a. Estimated variable manufacturing overhead per machine hour	$2.10
b. Estimated number of machine hours	16,000
c. Estimated total variable manufacturing overhead          (a x b)	$33,600
d. Estimated total fixed manufacturing overhead	$104,000
Estimated total manufacturing overhead                         (c + d)	$137,600