Question

Bulla 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: Machine-hours Direct labor-hours Machining Customizing 12,000 19,000 2000 5000 50,400 $ 83,600 $ 3.00 $ 6.00 Total fixed manufacturing overhead cost Variable manufacturing overhead per machine-hour Variable manufacturing overhead per direct labor-hour During the current month the company started and finished Job K369. The following data were recorded for this job: Job K369: Machining Customizing Machine-hours Direct labor-hours Required: Calculate the following: Predetermined OH rate for Machining (round to 2 decimal places) $ Predetermined OH rate for Customizing (round to 2 decimal places) Total Amount of OH applied to job K369 through both departments (do not include commas)

Answer 1

1.

Predetermined overhead rate for Machining = Variable manufacturing overhead rate per machine hour + Total fixed manufacturing overhead costs/Total machine hours

= 3 + 50,400/12,000

= 3 + 4.2

= $7.2 per machine hour

2.

Predetermined overhead rate for Customizing = Variable manufacturing overhead rate per direct labor hour + Total fixed manufacturing overhead costs/Total direct labor hours

= 6 + 83,600/5,000

= 6 + 16.72

= $22.72 per direct labor hour

3.

Machining overhead applied to Job K369 = Actual machine hours used x  Predetermined overhead rate

= 50 x 7.2

= $360

Customizing overhead applied to Job K369 = Actual direct labor hours used x  Predetermined overhead rate

= 50 x 22.72

= $1,136

Total amount of overhead applied to job K369 = Machining overhead applied to Job K369 + Customizing overhead applied to Job K369

= 360 + 1,136

= $1,496

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