Question

EXHIBIT 2-5 Dickson Company: An Example Using Multiple Predetermined Overhead Rates Step 1 Calculate the estimated total manufacturing overhead cost for each department. Milling Department Overhead Cost(Y): Assembly Department Overhead Cost (Y): = $390,000 + ($2.00 per MH 60,000 MHs) = $500,000 + ($3.75 per DLH 80,000 DLHs) = $390,000+ $120,000 = $500,000 + $300,000 = $510,000 = $800,000 Step 2 Calculate the predetermined overhead rate in each department Milling Department Overhead Rate: Assembly Department Overhead Rate: $510,000 $800,000 60,000 machine-hours 80,000 direct labor-hours $8.50 per machine-hour $10.00 per direct labor-hour Step 3. Calculate the amount of overhead applied from both departments to Job 407 Milling Department: Overhead Applied to Job 407 Assembly Department: Overhead Applied to Job 407 = $8.50 per MH 90 MHs = $10.00 per DLH 20 DLHS = $765 = $200 Step 4 Calculate the total job cost for Job 407 Milling Assembly Total Direct materials $800 $370 $ 1,170 Direct labor $70 $280 350 Manufacturing overhead applied $765 $200 965 Total cost of Job 407 $2,485 Step 5: Calculate the selling price for Job 407 Total cost of Job 407 $2.485.00 Markup ($2,485 x 75%) 1,863.75 Selling price of Job 407 $4,348.75

Answer 1

Answer: Amount (in $)

Particulars	Milling Department	Assembly Department	Total
Fixed Manufacturing Cost	390,000	800,000
Total Machine Hours/ Direct labour Hours	60,000	80,000
Overhead Rate	6.5 per MH	10 per DLH
JOB 408
Machine Hours Worked	80	3
Direct Labour Hours	5	20
Direct Material Cost	520	300	820
Direct Labour Cost	85	320	405
Overhead Cost	(80*6.5) 520	(10*20) 200	720
Total Cost			1,945
Add: Markup 75%			1,458.75
Total Selling Price			3,403.75

3. The Overhead Rate of Assembly Department is determined by Direct Labour Hours. Any increase or decrease in Machine Hours total will not affect the overhead rate of Assembly Department

Therefore, selling price of Job 408 will be 3,306.5

          
         

4. Amount (in $)

Particulars	Milling Department	Assembly Department	Total
Fixed Manufacturing Cost	390,000	800,000
Total Machine Hours/ Direct labour Hours	60,000	40,000
Overhead Rate	6.5 per MH	20 per DLH
JOB 408
Machine Hours Worked	80	3
Direct Labour Hours	5	20
Direct Material Cost	520	300	820
Direct Labour Cost	85	320	405
Overhead Cost	(80*6.5) 520	(20*20) 400	920
Total Cost			2,145
Add: Markup 75%			1,608.75
Total Selling Price			3,753.75

      

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