Question

Problem 2A-4A Waterway Company uses a job order cost system in each of its three manufacturing departments. Manufacturing overhead is applied to jobs on the basis of direct labor cost in Department D, direct labor hours in Department E, and machine hours in Department K. In establishing the predetermined overhead rates for 2020, the following estimates were made for the year. Department D E K Manufacturing overhead $ 1,197,000 $ 1,500,000 $ 720,000 Direct labor costs $ 1,496,250 $ 1,250,000 $ 450,000 Direct labor hours 100,000 125,000 40,000 Machine hours 400,000 500,000 120,000 During January, the job cost sheets showed the following costs and production data. Department D E K Direct materials used $ 140,000 $ 126,000 $ 78,000 Direct labor costs $ 120,000 $ 110,000 $ 37,500 Manufacturing overhead incurred $ 99,000 $ 124,000 $ 79,000 Direct labor hours 8,000 11,000 3,500 Machine hours 34,000 45,000 10,450

Compute the predetermined overhead rate for each department. (Round answers to 2 decimal places, e.g. 12.50.) Overhead rate Department D % Department E $ per direct labor hour Department K $ per machine hour LINK TO TEXT LINK TO TEXT

Compute the total manufacturing costs assigned to jobs in January in each department. Manufacturing Costs Department D $ Department E $ Department K $ LINK TO TEXT LINK TO TEXT

Compute the under- or overapplied overhead for each department at January 31. Manufacturing Overhead Department D $                Underapplied                            Overapplied             Department E $                Overapplied                            Underapplied             Department K $                Overapplied                            Underapplied             Click if you would like to Show Work for this question: Open Show Work

Answer 1

1)
	Overhead rate
Predetermined overhead rate - Department D        = Manufacturing overhead / Direct labor costs        = $ 1,197,000 / $ 1,496,250	80	%
Predetermined overhead rate - Department E        = Manufacturing overhead / Direct labor hours         = $ 1,500,000 / 125,000	$ 12	per direct labor hour
Predetermined overhead rate - Department K        = Manufacturing overhead / Machine hours        = $ 720,000 / 120,000	$ 6	per machine hour
2)
Particulars	Department D	Department E	Department K
Direct Materials used	$ 140,000	$ 126,000	$ 78,000
Direct Labor	$ 120,000	$ 110,000	$ 37,500
Manufacturing overhead	$ 96,000 ( $ 120,000 x 80% )	$ 132,000 ( 11,000 hours x $ 12 per DLH )	$ 62,700 ( 10,450 MH x $ 6 per MH )
Total manufacturing costs assigned to jobs	$ 356,000	$ 368,000	$ 178,200
3)
Particulars	Actual Manufacturing Overhead	Applied Manufacturing Overhead	Over (or) Under Applied
Department D	$ 99,000	$ 96,000	$ 3,000 (UnderApplied)
Department E	$ 124,000	$ 132,000	$ 8,000 (OverApplied)
Department K	$ 79,000	$ 62,700	$ 16,300 (UnderApplied)