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		36,000			58,200
Machine-hours		81,000			31,000
Fixed manufacturing overhead cost	$	194,400		$	558,720
Variable manufacturing overhead per machine-hour	$	2.40			-
Variable manufacturing overhead per direct labor-hour		-		$	4.40

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		77			127
Machine-hours		330			70
Direct materials	$	946		$	1,100
Direct labor cost	$	740		$	990

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 37 units, what would be the unit product cost?

Answer 1

Solution 1:

Computation of overhead rate
Particulars	Molding	Painting
Fixed overhead costs	$194,400.00	$558,720.00
Variable overhead costs	$194,400.00	$256,080.00
Total overhead	$388,800.00	$814,800.00
Allocation base	Machine hour	Labor hour
Quantity of allocation base	81000	58200
Overhead rate per machine hour / labor hour	$4.80	$14.00

Solution 2:

Computation of overhead applied to Job 205
Particulars	Amount
Overhead applied - Molding	$1,584
Overhead applied - Painting	$1,778
Total	$3,362

Solution 3a:

Computation of manufacturing cost - Job 205
Particulars	Molding	Painting	Total
Direct materials	$946.00	$1,100.00	$2,046.00
Direct labor	$740.00	$990.00	$1,730.00
Manufacturing overhead	$1,584.00	$1,778.00	$3,362.00
Total costs	$3,270.00	$3,868.00	$7,138.00

Solution 3b:

Computation of unit product cost of Job 205
Particulars	Amount
Total costs	$7,138
Nos of units produced	37
Unit product cost	$192.92