Question

Problem 2-4A (Video) 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. Department Manufacturing overhead Direct labor costs Direct labor hours Machine hours $1,260,000 $1,800,000 100,000 400,000 $1,750,000 $1,250,000 125,000 500,000 $840,000 $450,000 40,000 120,000 During January, the job cost sheets showed the following costs and production data. Department Direct materials used Direct labor costs Manufacturing overhead incurred Direct labor hours Machine hours $140,000 $120,000 $99,000 8,000 34,000 $126,000 $110,000 $124,000 11,000 45,000 $78,000 $37,500 $79,000 3,500 10,310 Compute the predetermined overhead rate for each department. (Round answers to 2 decimal places, e.g. 12.50 or 12.50%.) Overhead rate 7 0 % Department D Department E 1 4.00 per direct labor hour Department K 7.00 per machine hour LINK TO TEXT LINK TO TEXT VIDEO: SIMILAR PROBLEM

Answer 1

Solutions:

Computation of Predetermined overhead rate for Each department
Particulars	D	E	K
Budgeted Manufacturing Overhead	$12,60,000	$17,50,000	$8,40,000
/Budgeted direct labor Cost	$18,00,000
/Budgeted direct labor Hours		125000
/Budgeted Machine hours			120000
Overhead rate of department	70%	$14.00	$7.00
Computation of Total manufacturing Cost assigned
Particulars	D	E	K
Actual Direct labor Cost	$1,20,000
Actual Direct labor Hours		11000
Actual Machine hours			10310
Overhead rate of department	70%	$14.00	$7.00
Manufacturing overhead applied	$84,000	$1,54,000	$72,170
Add: Direct materials	$1,40,000	$1,26,000	$78,000
Add: Direct labor	$1,20,000	$1,10,000	$37,500
Total manufacturing Cost assigned	$3,44,000	$3,90,000	$1,87,670
Computation of Under/Over applied Overhead
Particulars	D	E	K
Manufacturing overhead applied	$84,000	$1,54,000	$72,170
Actual Overhead incurred	$99,000	$1,24,000	$79,000
Differnce overhead	$15,000	$30,000	$6,830
	Under-applied	Over-applied	Under-applied