Question

Bulla Corporation has two production departments, Machining and Customizing. The company uses a job-order costing system and computes a predetermined overhead rate in each production department. The Machining Department's predetermined overhead rate is based on machine-hours and the Customizing Department's predetermined overhead rate is based on direct labor-hours. At the beginning of the current year, the company had made the following estimates:

	Machining		Customizing
Machine-hours		24,000			15,000
Direct labor-hours		1000			2000
Total fixed manufacturing overhead cost	$	108,000		$	70,500
Variable manufacturing overhead per machine-hour	$	1.50
Variable manufacturing overhead per direct labor-hour				$	3.00

During the current month the company started and finished Job K369. The following data were recorded for this job:

Job K369:	Machining		Customizing
Machine-hours	60		30
Direct labor-hours	40		60

Required:

Calculate the following:
Predetermined OH rate for Machining (round to 2 decimal places)	$
Predetermined OH rate for Customizing (round to 2 decimal places)	$
Total Amount of OH applied to job K369 through both departments (do not include commas)	$

Answer 1

a.

Estimated machine hours of Machining = 24,000

Total fixed manufacturing overhead cost = $108,000

Variable manufacturing overhead per machine-hour = $1.50

Predetermined OH rate for Machining = Variable manufacturing overhead per machine-hour + (Total fixed manufacturing overhead cost/Estimated machine hours of Machining)

= 1.50+(108,000/24,000)

= 1.50+4.50

= $6 per machine hours

b.

Estimated direct labor hours of Customizing = 2,000

Total fixed manufacturing overhead cost = 70,500

Variable manufacturing overhead per direct labor-hour = $3

Predetermined OH rate for Customizing = Variable manufacturing overhead per direct labor-hour + (Total fixed manufacturing overhead cost /Estimated direct labor hours of Customizing )

= 3+(70,500/2,000)

= 3+35.25

= $38.25 per direct labor hour

c.

Machining department overhead applied to job k369 = Predetermined OH rate for Machining x Machining department machine hours used in Job k369

= 6 x 60

= $360

Customizing department overhead applied to Job k369 = Predetermined OH rate for Customizing x Customizing department direct labor hours used in Job k369

= 38.25 x 60

= $2,295

Total overheads applied to Job k369 = Machining department overhead applied to job k369 +Customizing department overhead applied to Job k369

= 360+2,295

= $2,655

Predetermined OH rate for Machining	$6
Predetermined OH rate for Customizing	$38.25
Total Amount of OH applied to job k369 through both departments	$2655

Kindly comment if you need further assistance.

Thanks‼!