Question

High Desert Potteryworks makes a variety of pottery products that it sells to retailers. The company uses a job-order costing system in which departmental predetermined overhead rates are used to apply manufacturing overhead cost to jobs. The predetermined overhead rate in the Molding Department is based on machine-hours, and the rate in the Painting Department is based on direct labor- hours. At the beginning of the year, the company provided the following estimates: Department Molding 12,000 70,000 $ 497,000 $ 615,000 Painting Direct labor-hours 60,000 Machine-hours 8,000 Fixed manufacturing overhead cost Variable manufacturing overhead per 1.50 machine-hour Variable manufacturing overhead per direct labor-hour 2.00 Job 205 was started on August 1 and completed on August 10. The company's cost records show the following information concerning the job: Department Molding Painting Direct labor-hours 30 84 Machine-hours 110 20 $ 770 $ 525 Direct materials Direct labor cost $1,332 $1,470 Required: 1. Compute the predetermined overhead rates used in the Molding Department and the Painting Department. 2. Compute the total overhead cost applied to Job 205. 3-a. What would be the total manufacturing cost recorded for Job 205? 3-b. If the job contained 50 units, what would be the unit product cost?

NEED HELP WITH ALL REQUIREMENTS OF QUESTION

Answer 1

Solution:

1. Computation of Predetermined overhead rates

Molding Department            = Fixed overhead / Machine Hours

                                         = $497,000 / 70,000 hrs

                                         = $7.1 per hour

Painting Department            = Fixed overhead / Direct Labor Hours

                                          = $615,000 / 60,000 hrs

                                          = $10.25 per hour

2. Computation of total overhead cost applied to Job 205

Molding Department            = Fixed overhead + Variable overhead

                                         = (110 hrs * $7.1 per hour) + (110 hrs * $1.5 per hour)

                                         = $781 + $165

                                         = $946

Painting Department            = Fixed overhead + Variable overhead

                                          = (84 hrs * $10.25 per hour) + (84 hrs * $2 per hour)

                                          = $861 + $ 168

                                          = $1029

3. a) Computation of total manufacturing cost for Job 205

Particulars	Departments
	Molding	Painting	Total
Direct Material Direct labor cost Overheads         Fixed         Variable	$770 $525 $781 $165	$1,332 $1,470 $861 $168	$2,102 $1,995 $1,642 $333
Total costs	$2,241	$3,831	$6,072

b) Computation of product cost per unit for the Job

     Product Cost per unit         = Total Cost / No. Of units produced

                                             = $6,072 / 50 units

                                             = $ 121.44 per unit