Question

Bierce Corporation has two manufacturing departments--Machining and Finishing. The company used the following data at the beginning of the year to calculate predetermined overhead rates:

	Machining		Finishing		Total
Estimated total machine-hours (MHs)		4,000		6,000		10,000
Estimated total fixed manufacturing overhead cost	$	4,000	$	42,000	$	46,000
Estimated variable manufacturing overhead cost per MH	$	2.20	$	6.00

During the most recent month, the company started and completed two jobs--Job B and Job K. There were no beginning inventories. Data concerning those two jobs follow:

	Job B		Job K
Direct materials	$	13,700	$	8,000
Direct labor cost	$	21,200	$	8,100
Machining machine-hours		2,500		1,500
Finishing machine-hours		2,500		3,500

Required:

a. Assume that the company uses a plantwide predetermined manufacturing overhead rate based on machine-hours. Calculate that overhead rate. (Round your answer to 2 decimal places.)

b. Assume that the company uses a plantwide predetermined manufacturing overhead rate based on machine-hours. Calculate the amount of manufacturing overhead applied to Job B. (Do not round intermediate calculations.)

c. Assume that the company uses a plantwide predetermined manufacturing overhead rate based on machine-hours. Calculate the amount of manufacturing overhead applied to Job K. (Do not round intermediate calculations. Round your answer to the nearest whole dollar amount.)

d. Assume that the company uses departmental predetermined overhead rates with machine-hours as the allocation base in both departments. What is the departmental predetermined overhead rate in the Machining department? (Round your answer to 2 decimal places.)

e. Assume that the company uses departmental predetermined overhead rates with machine-hours as the allocation base in both production departments. What is the departmental predetermined overhead rate in the Finishing department? (Round your answer to 2 decimal places.)

f. Assume that the company uses departmental predetermined overhead rates with machine-hours as the allocation base in both production departments. How much manufacturing overhead will be applied to Job B? (Do not round intermediate calculations.)

g. Assume that the company uses departmental predetermined overhead rates with machine-hours as the allocation base in both production departments. How much manufacturing overhead will be applied to Job K?. (Do not round intermediate calculations.)

Answer 1

Answer a.

Machining Department:

Estimated manufacturing overhead = Estimated variable manufacturing overhead per machine hour * Estimated machine hours + Estimated fixed manufacturing overhead
Estimated manufacturing overhead = $2.20 * 4,000 + $4,000
Estimated manufacturing overhead = $12,800

Finishing Department:

Estimated manufacturing overhead = Estimated variable manufacturing overhead per machine hour * Estimated machine hours + Estimated fixed manufacturing overhead
Estimated manufacturing overhead = $6.00 * 6,000 + $42,000
Estimated manufacturing overhead = $78,000

Total estimated manufacturing overhead = Estimated manufacturing overhead for Machining Department + Estimated manufacturing overhead for Finishing Department
Total estimated manufacturing overhead = $12,800 + $78,000
Total estimated manufacturing overhead = $90,800

Predetermined overhead rate = Total estimated manufacturing overhead / Total estimated machine hours
Predetermined overhead rate = $90,800 / 10,000
Predetermined overhead rate = $9.08 per machine hour

Answer b.

Job B:

Manufacturing overhead applied = Predetermined overhead rate * Actual machine hours
Manufacturing overhead applied = $9.08 * 5,000
Manufacturing overhead applied = $45,400

Answer c.

Job K:

Manufacturing overhead applied = Predetermined overhead rate * Actual machine hours
Manufacturing overhead applied = $9.08 * 5,000
Manufacturing overhead applied = $45,400

Answer d.

Machining Department:

Estimated manufacturing overhead = Estimated variable manufacturing overhead per machine hour * Estimated machine hours + Estimated fixed manufacturing overhead
Estimated manufacturing overhead = $2.20 * 4,000 + $4,000
Estimated manufacturing overhead = $12,800

Predetermined overhead rate = Estimated manufacturing overhead / Estimated machine hours
Predetermined overhead rate = $12,800 / 4,000
Predetermined overhead rate = $3.20 per machine hour

Answer e.

Finishing Department:

Estimated manufacturing overhead = Estimated variable manufacturing overhead per machine hour * Estimated machine hours + Estimated fixed manufacturing overhead
Estimated manufacturing overhead = $6.00 * 6,000 + $42,000
Estimated manufacturing overhead = $78,000

Predetermined overhead rate = Estimated manufacturing overhead / Estimated machine hours
Predetermined overhead rate = $78,000 / 6,000
Predetermined overhead rate = $13.00 per machine hour

Answer f.

Job B:

Manufacturing overhead applied = $3.20 * 2,500 + $13.00 * 2,500
Manufacturing overhead applied = $40,500

Answer g.

Job K:

Manufacturing overhead applied = $3.20 * 1,500 + $13.00 * 3,500
Manufacturing overhead applied = $50,300