Question

High Desert Pottery works makes a variety of pottery products that it sells to retailers. The company uses a job-order osting 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 Painting 12,eee 60, eee 70,000 8, eee 497,000 $ 615,000 1.50 Direct labor-hours Machine-hours Fixed manufacturing overhead cost Variable manufacturing overhead per 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 Machine-hours Direct materials Direct labor cost 110 $ 770 $ 525 $ 1,332 $1,479 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?

Answer 1

1)	Predetermined overhead rates
	Molding
	= (fixed overhead cost / Number of machine-hours ) + Variable overhead cost per machine hours
	= ($497000/70000) +$1.50
	=$7.1+1.5
	=$8.6 per MH
	Painting
	= (fixed overhead cost / Number of labor hours ) + Variable overhead cost per labor hours
	=($615000/60000) +$2
	=$10.25+2
	=$12.25	per LH
2)	Total Manufacturing overhead cost applied to Job 205
	=(Machine hours in molding *$8.6 per MH) + (Labor hours in Painting *$12.25 per LH)
	=(110 hours *$8.6) + (84 hours *$10.25)
	=$1807
3a)	total manufacturing cost recorded for Job 205
		Department		Total
		Molding	Painting
	Direct materials	$                      770	$            1,332	$       2,102
	Direct labor	$                      525	$            1,470	$       1,995
	Manufacturing overhead	$                      946	$                861	$       1,807
	Total cost	$                   2,241	$            3,663	$       5,904
3b)	If the job contained 50 units, what would be the unit product cost
	=total manufacturing cost/number of units
	=$5904/50
	=$118.08 per unit
	=$118 per unit (rounded off)