Question

Harnett Corporation has two manufacturing departments--Molding and Assembly. The company used the following data at the beginning of the period to calculate predetermined overhead rates:

	Molding		Assembly		Total
Estimated total machine-hours (MHs)		3,000		7,000		10,000
Estimated total fixed manufacturing overhead cost	$	24,000	$	53,200	$	77,200
Estimated variable manufacturing overhead cost per MH	$	1.00	$	2.00

During the period, the company started and completed two jobs--Job E and Job M. Data concerning those two jobs follow:

	Job E		Job M
Direct materials	$	21,600	$	9,300
Direct labor cost	$	22,600	$	9,500
Molding machine-hours		2,500		500
Assembly machine-hours		2,500		4,500

Required:

d. Assume that the company uses a plantwide predetermined manufacturing overhead rate based on machine-hours and uses a markup of 20% on manufacturing cost to establish selling prices. Calculate the selling price for Job E. (Do not round intermediate calculations.)

e. Assume that the company uses departmental predetermined overhead rates with machine-hours as the allocation base in both departments. What is the departmental predetermined overhead rate in the Molding department? (Round your answer to 2 decimal places.)

f. Assume that the company uses departmental predetermined overhead rates with machine-hours as the allocation base in both production departments. What is the departmental predetermined overhead rate in the Assembly department? (Round your answer to 2 decimal places.)

d. Selling price e. Molding predetermined overhead rate f. Assembly predetermined overhead rate per MH per MH

Answer 1

Concept:

Plant-wide predetermined manufacturing overhead rate = (Estimated total fixed overheads (all departments) / Estimated allocation base) + Variable overhead per MH

Departmental predetermined overhead rate = (Estimated departmental fixed overheads / Estimated allocation base of the department)  + Variable overhead per MH

Answer:

d. Selling Price for Job E

Plant-wide predetermined manufacturing fixed overhead rate -77,200/10,000 - $7.72 Selling Price for Job E Particulars Direct materials Direct labor cost Manufacturing OH (Molding) Amount (S) $21,600 $22,600 Variable (2500 MH * $1) Fixed Allocated (2500 MH * $7.72) $2,500 $19,300 Manufacturing OH (Assembly) $5,000 $19,300 $90,300 $18,060 $108,360 Variable (2500 MH * $2) Fixed Allocated (2500 MH * $7.72 Total cost Margin @ 20% of cost Selling Price

e. Molding predetermined overhead rate = ($24,000 / 3,000 hrs) + $1.00 = $9.00 per MH

f. Assembly predetermined overhead rate = ($53,200 / 7,000 hrs) + $2.00 = $9.60 per MH