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: Direct labor-hours Machine-hours Fixed manufacturing overhead cost Variable manufacturing overhead per machine-hour Variable manufacturing overhead per direct labor-hour Department Molding Painting 36,500 50, 100 88,000 34,000 $228,800 $445, 890 $ 2.60 $ 4.60 Job 205 was started on August 1 and completed on August 10. The company's cost records show the following information concerning the job: Direct labor-hours Machine-hours Direct materials Direct labor cost Department Moldingpainting 78 133 370 65 $ 940 $1,160 $ 720 $ 960 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 35 units, what would be the unit product cost?

Answer 1

Answer 1. Predetermined overhead rate

Molding	$5.20	per MH
Painting	$13.50	per DLH

Explanation

Predetermined overhead rate for Molding =

(Estimated fixed manufacturing overhead cost / Estimated machine-hours) + Variable manufacturing overhead per machine-hour

= ($228,800 / 88,000 MH) + $2.60 = $5.20 per MH

Predetermined overhead rate for Molding =

(Estimated fixed manufacturing overhead cost / Estimated direct labor-hourss) + Variable manufacturing overhead per irect labor-hours

= ($445,890 / 50,100 MH) + $4.60 = $13.50 per MH

Answer 2.

Total overhead cost

$3,720

Explanation

Molding Department overhead applied (370 MH * $5.20)	1,924
Painting Department overhead applied (133 DLH * $13.50)	1,796
Total overhead cost	$3,720

Answer 3 A.

	Molding	Painting	Total
Direct materials	940	1,160	$2,100
Direct labor	720	960	1.680
Manufacturing overhead	1,924	1,796	3,720
Total cost	$3,584	$3,916	$7,500

Answer 3 B.

Unit product cost

$214.29

per unit

Explanation

Unit product cost = Total manufacturing cost / Number of units

= $7,500 / 35 units = $214.29.