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			50,900
Machine-hours		83,000			36,000
Fixed manufacturing overhead cost	$	141,100		$	437,740
Variable manufacturing overhead per machine-hour	$	3.00			-
Variable manufacturing overhead per direct labor-hour		-		$	5.00

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		84			126
Machine-hours		390			67
Direct materials	$	934		$	1,100
Direct labor cost	$	740		$	1,020

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 36 units, what would be the unit product cost?

Answer 1

1. Predetermined Overhead Rate

Molding Department	4.70 Per MH
Painting department	17.16 Per DLH

Explanation;  

The estimated total manufacturing overhead cost in the molding department is computed as Follows;  

Y = 141,100 + $3 Per MH × 83,000 MH

Estimated Fixed Manufacturing Overhead	$141,100
Estimated Variable Manufacturing Overhead ($3×83,000)	$249,000
Estimated Total Manufacturing Overhead Cost	$390,100

The Predetermined Overhead Rate is Calculated as Follows;

Estimated Total Manufacturing Overhead	$390,100
÷Estimated Total Machine Hours	83,000MHs
Predetermined Overhead Rate	$4.70 Per MH

Painting Department;

The estimated total manufacturing overhead cost in the painting department is computed as Follows;  

Y = $437,740 + $5 Per DLH × 36,000 DLH

Estimated Fixed Manufacturing Overhead	$437,740
Estimated Variable Manufacturing Overhead ($5 Per DOH × 36,000 DLH )	$180,000
Estimated Total Manufacturing Overhead Cost	$617,740

The Predetermined Overhead Rate is Computed as Follows ;

Estimated Total Manufacturing Overhead	$617,740
÷Estimated Total DLHs	36,000
Predetermined Overhead Rate	17.16 Per DLH

2. Total Overhead Cost = $3,995

Explanation;  

Molding Department Overhead Applied;  

390 machine hours × $4.70 Per MH = $1,833   

Painting DDepartment Overhead Applied;  

126 DLH × $17.16 Per DLH = $2,162

Total Overhead Cost =$3,995

3.a).

	Molding	Painting	Total
Direct Materials	934	1100	2,034
Direct Labor	740	1,020	1,760
Manufacturing Overhead	1,833	2,162	3,995
Total Cost	3,507	4,282	7,789

3.b)

Unit Product Cost = $216Per Unit

Total Manufacturing Cost	$7,789
Number of Units in the Job	36
Unit Product Cost	$216 Per Unit