Problem

Monark Electronics uses job order costing and applies manufacturing overhead to individual...

Monark Electronics uses job order costing and applies manufacturing overhead to individual jobs by using predetermined overhead rates, in Department A. overhead is applied on the basis of ma­chine hours, and in Department B, on the basis of direct labor hours. At the beginning of the current year, management-made the following budget estimates as a step toward determining the overhead application rates:

Annual Estimates

Department A

Department B

Direct labor

  $630,000

$450,000

Manufacturing overhead

  $810,000

$620,000

Machine-hours

  16,200

3,000

Direct labor hours

  25,200

24,800

Production of 1,000 circuit boards (job no. 652) was started in the middle of January and completed two weeks later. The cost records for this job show the following information:

 

Department A

Department B

Job no. 652 (1.000 units of product):

 

 

Cost of materials used on job

  $19,000

$1,750

Direct labor cost

  $1,500

$750

Direct labor hours 

  60

40

Machine-hours

180

120

Instructions

a.Determine the overhead rate that should be used for each department in applying overhead costs to job no. 652.


b.What is the total cost of job no. 652. and what is the unit cost of the product manufactured on this production order ?


c.Prepare the journal entries required to record the sale (on account) of all 1.000 circuit boards to Computex Computers. The total sales price w as $50,000.


d.Assume that actual overhead costs for the year were $800,000 in Department A and $615.000 in Department B. Actual machine-hours in Department A were 16,500, and actual direct labor hours in Department B were 24.000 during the year. On the basis of this information, deter­mine the over- or underapplied overhead in each department for the year.

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