Question

Sweeten Company had no jobs in progress at the beginning of March and no beginning inventories. The company has two manufacturing departments-Molding and Fabrication. It started, completed, and sold only two jobs during March- Job P and Job Q. The following additional Information is available for the company as a whole and for Jobs P and Q (all data and questions relate to the month of March): Molding Fabrication Total Estimated total machine-hours used 2,500 1,500 4,000 Estimated total fixed manufacturing overhead $14,750 $17,850 $32,600 Estimated variable manufacturing overhead per machine-hour $ 3.30 $ 4.10 Job P $32,000 $36,200 Job O $17,500 $15, 100 Direct materials Direct labor cost Actual machine-hours used: Molding Fabrication Total 3,600 2,500 6,100 2,700 2,800 5,500 Sweeten Company had no underapplied or overapplied manufacturing overhead costs during the month. Required: For questions 1-8, assume that Sweeten Company uses a plantwide predetermined overhead rate with machine-hours as the allocation base. For questions 9-15, assume that the company uses departmental predetermined overhead rates with machine-hours as the allocation base in both departments.

Answer 1

Solution :

Step 1 : Plant Wide Overhead Rate :

Plantwide Overhead Rate = Total Manufacturing Overhead / Total Estimated Hours

= (Variabe OH + Fixed OH) / Total Estimated Hours

= [(2,500 * $ 3.30) + (1,500 * $ 4.10) + $ 32,600] / 4,000

= [$ 8,250 + $ 6,150 + $ 32,600] / 4,000

= $ 47,000 / 4,000

= $ 11.75 per Hour.

Step 2 : Manufacturing Cost Assigned to Job :   

(a) Direct Material	$ 32,000
(b) Direct Labor	$ 36,200
(c) Overhead (3,600 + 2,500) * $ 11.75	$ 71,675
(d) Manufacturing OH Cost (a + b + c)	$ 139,875

Step 3 : Unit Product Cost :

Unit Product Cost             = Total Manufacturing Cost of Job / Total Units

                                         = $ 139,875 / 20 Units

                                         = $ 6,994 per Unit

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