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		32,000			56,600
Machine-hours		81,000			35,000
Fixed manufacturing overhead cost	$	194,400		$	526,380
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		79			134
Machine-hours		360			67
Direct materials	$	944		$	1,260
Direct labor cost	$	710		$	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 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	$1,94,400	$5,26,380
/Machine Hours	81000
/Direct Labor Hours		56600
Fixed Manufacturing overhead Rate	$2.40	$9.30
Add: Variable Manufacturing Overhead rate	$2.60	$4.60
Predetermined overhead rate	$5.00	$13.90
	Per Machine Hour	Per Labor Hour

Solution 2:

Computation of Total Overhead cost Applied to Job 205
	Molding Department	Painting Department
Predetermined overhead rate	$5.00	$13.90
*Machine Hours	360
*Labor Hours		134
Manufacturing Overhead applied	$1,800.00	$1,862.60
Total Manufacturing Overhead Applied = $1800 + $1862.60 = $3,662.60

Solution 3-a:

Computation of Total Manufacturing cost for Job 205
	Amount
Direct material ($944+$1260)	$2,204.00
Direct Labor Cost ($710+ $990)	$1,700.00
Manufacturing Overhead applied	$3,662.60
Total Manufacturing Cost for Job 205	$7,566.60

Solution 3-b:

Unit product Cost = $7566.60/ 40 units = $189.165