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: Department Molding Painting Direct labor-hours 34,500 58,000 Machine-hours 86,000 37,000 Fixed manufacturing overhead cost $ 240,800 $ 545,200 Variable manufacturing overhead per machine-hour $ 2.60 - Variable manufacturing overhead per direct labor-hour - $ 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: Department Molding Painting Direct labor-hours 73 128 Machine-hours 320 74 Direct materials $ 940 $ 1,300 Direct labor cost $ 680 $ 950 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 40 units, what would be the unit product cost?

Answer 1

Solution 1:

Computation of Predetermined overhead rate
	Molding Department	Painting Department
Fixed Manuafcturing Overhead cost	$2,40,800	$5,45,200
/Machine Hours	86000
/Direct Labor Hours		58000
Fixed Manufacturing overhead Rate	$2.80	$9.40
Add: Variable Manufacturing Overhead rate	$2.60	$4.60
Predetermined overhead rate	$5.40	$14.00
	Per Machine Hour	Per Labor Hour

Solution 2:

Computation of Total Overhead cost Applied to Job 205
	Molding Department	Painting Department
Predetermined overhead rate	$5.40	$14.00
*Machine Hours	320
*Labor Hours		128
Manufacturing Overhead applied	$1,728	$1,792
Total Manufacturing Overhead Applied = $1728 + $1792 = $3,520

Solution 3-a:

Computation of Total Manufacturing cost for Job 205
	Amount
Direct material ($940+$1300)	$2,240
Direct Labor Cost ($680+ $950)	$1,630
Manufacturing Overhead applied	$3,520
Total Manufacturing Cost for Job 205	$7,390

Solution 3-b:

Unit Product cost = Total manufacturing costs / Units = $7390 / 40 = $184.75