Question

High Desert Potteryworks.... show steps if possible

Problem 2-19 Multiple Predetermined Overhead Rates; Applying Overhead LO21, LO2-2, Lo24) 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 MoldingPainting 68,000 8,000 Direct labor-hours Machine-hours Fixed manufacturing overhead cost Variable manufacturing overhead per machine- hour Variable manufacturing overhead per direct labor-hour 12,000 7e,060 s 497,000 s 615,e00 $ 1.5e 2.80 Job 205 was started on August 1 and completed on August 10. The companys cost records show the following information concerming the job: tment Holding Paintings Direct labor-hours Nachine-hours Direct materials Direct labor cost 84 20 S 770$1,332 $25$ 1,470 36 11e Required: 1. Compute the predetermined overhead rates used in the Molding De 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? and the Painting Department < Prey 60, 6111 Scoreansoer> ny arch

Answer 1

1. Predetermined Overhead Rates during the year :
For the purpose of calculating the overhead rates, let's first calculate total overheads (i.e. fixed and variable both) in both departments.
Total Overheads in Molding Department = Fixed Manufacturing Overhead Cost + Variable Manufacturing Overhead Cost
= $497000 + (70000 Machine hours * $1.50 per hour)
= $497000 + $105000
= $602000
Total Overheads in Painting Department = Fixed Manufacturing Overhead Cost + Variable Manufacturing Overhead Cost
= $615000 + (60000 Direct Labor hours * $2.00 per hour)
= $615000 + $120000
= $735000

Now, the predetermined overhead rates during the year are as follows :
Molding Department,
Predetermined Overhead Rate = Total Overheads in Molding Department / Total Machine-hours
= $602000 / 70000 Machine Hours
= $8.6 per Machine Hour
Painting Department,
Predetermined Overhead Rate = Total Overheads in Painting Department / Total Direct Labor-hours
= $735000 / 60000 Machine Hours
= $12.25 per Direct Labor Hour

2. Total Overhead Cost applied to Job 205 :
Based on the above calculated Overhead rates and the hours utilized given in question, total overhead cost of the Job 205 is as follows :
Total Overhead Cost = Overhead in Molding Department + Overhead in Painting Department
= (110 Machine Hours * $8.6 per Machine Hour) + (84 Labor Hours * $12.25 per Direct Labor Hour)
= $946 + $1029
= $1975

3-a. Total Manufacturing cost recorded for Job 205 :
For the purpose of calculating total manufacturing cost for Job 205, we need to add all the cost incurred from both the departments using the below formula -
Total Manufacturing Cost = Direct Material Cost + Direct Labor Cost + Manufacturing Overhead Cost
It can be better understood with the following table :

	Molding Department	Painting Department	Total
Direct Material	$770	$1332	$2102
Direct Labor	$525	$1470	$1995
Manufacturing Overhead (Refer Point 2)	$946	$1029	$1975
Total Cost	$2241	$3831	$6072

So, Total Manufacturing cost of Job 205 is $6072.

3-b. If the Job contains 50 units, the unit production cost will be as follows :
Unit Product Cost = Total Manufacturing Cost of the Job / Number of Units
= $6072 / 50 units
= $121.44 per unit