Question

2. Megan Company has two departments, X and Y. Overhead is applied based on direct-labor hours in Department X and machine hours in Department Y. The following additional information is available:

BUDGETED AMOUNTS
	Department X	Department Y
Direct-Labor Hours	18,000	16,500
Machine Hours	51,000	40,000
Factory Overhead	$225,000	$180,000

Actual Data for Job #10

	Department X	Department Y
Direct materials	$10,000	$16,000
Direct-labor cost	$11,000	$14,000
Machine hours	5,000	3,000
Direct-labor hours	1,100	1,400

Required:

1. Compute the budgeted factory-overhead rate (i.e., the $ rate per activity base hour, etc.) for Department X.

2. Compute the budgeted factory-overhead rate (i.e., the $ rate per activity base hour, etc.) for Department Y.

3. What is the total overhead cost of Job #10?

4. What is the total cost of Job #10?

5. If Job 10 consists of 50 units of product, what is the unit cost of this job?

Answer 1

1. Compute the budgeted factory-overhead rate for Department X:

As the overhead is applied based on direct-labor hours in Department X, overhead rate = Total Overhead rate/ Total direct labor hours = $225,000/18,000 hours = $12.5/hour.

2. Compute the budgeted factory-overhead rate for Department Y:

As the overhead is applied based on machine hours in Department Y, overhead rate = Total Overhead rate/ Total machine hours = $180,000/40,000 hours = $4.5/hour.

3. Computation of total overhead cost of Job #10:

Department X
Direct Labor Hours	A	1100
Overhead Rate	B	$12.5
Total Cost	C=A*B	$13,750
Department Y
Machine Hours	D	3000
Overhead Rate	E	$4.5
Total Cost	F=D*E	$13,500
Total Overhead Cost for Job #10	G=C+F	$27,250

4. Computation of total cost of Job #10:

Direct Material	Department X	$10,000
	Department Y	$16,000	$26,000
Direct Labor	Department X	$11,000
	Department Y	$14,000	$25,000
Overhead	Department X	$13,750
	Department Y	$13,500	$27,250
Total Cost			$78,250

5. Computation of per unit cost of this job:

Total Cost	A	$78,250
Units	B	50
Cost per Unit	C=A/B	$1,565