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		12,000		17,000
Direct labor-hours		2,000		7,000
Total fixed manufacturing overhead cost	$	61,200	$	32,900
Variable manufacturing overhead per machine-hour	$	1.30
Variable manufacturing overhead per direct labor-hour			$	4.10

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		70		10
Direct labor-hours		50		30

The estimated total manufacturing overhead for the Machining Department is closest to:

Multiple Choice:

• $15,600

• $61,200

• $83,300

• $76,800

Answer 1

Correct answer------------$76,800

Working

Machine hours	12000
Variable manufacturing overhead per machine-hour	$               1.30
Variable overhead (12000 x 1.30)	$    15,600.00
Add: Fixed overhead	$    61,200.00
Total estimated Overhead (61200+15600)	$    76,800.00

Answer 2

The answer is $76,800.