Question

High Desert Potteryworks makes a variety of pottery products that it sells to retailers such as Home Depot. The company uses a job-order costing system in which 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's management made the following estimates: Department Molding Painting Direct labor-hours 32,500 50,600 Machine-hours 87,000 32,000 Direct materials cost $185,000 $195,000 Direct labor cost $284,000 $517,000 Fixed manufacturing overhead cost $234,900 $490,820 Variable manufacturing overhead per machine-hour $2.60 - Variable manufacturing overhead per direct labor-hour - $4.60 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 80 127 Machine-hours 300 70 Materials placed into production $946 $1,140 Direct labor cost $700 $950 Required: 1. Compute the predetermined overhead rate used during the year in the Molding Department. Compute the rate used in the Painting Department. (Round your answers to 2 decimal places.) 2. Compute the total overhead cost applied to Job 205. (Round "Predetermined overhead rate" to 2 decimal places, other intermediate calculations and final answers to the nearest dollar amount.) 3-a. What would be the total cost recorded for Job 205? (Round "Predetermined overhead rate" to 2 decimal places, other intermediate calculations and final answers to the nearest dollar amount.) 3-b. If the job contained 38 units, what would be the unit product cost? (Round "Predetermined overhead rate" and final answer to 2 decimal places and other intermediate calculations to the nearest dollar amount.) 4. At the end of the year, the records of High Desert Potteryworks revealed the following actual cost and operating data for all jobs worked on during the year: Department Molding Painting Direct labor-hours 35,000 60,000 Machine-hours 86,800 24,100 Direct materials cost $163,800 $418,000 Direct labor cost $108,000 $436,000 Manufacturing overhead cost $470,840 $821,700 What was the amount of underapplied or overapplied overhead in each department at the end of the year? (Round "Predetermined overhead rate" to 2 decimal places, other intermediate calculations and final answers to the nearest dollar amount. Select "None" for no effect (i.e., zero variance).)

Answer 1

1) Pre determined overhead rate = Estimated total manufacturing cost/Estimated total amount of allocation base

Calculation of predetermined rate (Amount in $)

Particulars	Molding Department	Painting Department
a) Fixed manufaturing overhead cost	234,900	490,820
b) Machine Hours	87,000	-
c) Direct Labor hours	-	50,600
d) Overhead rate	2.70 (a/b)	9.70 (a/c)
e) Variable overhead rate	2.60	4.60
f) Total predetermined overhead rate (d+e)	5.30	14.30

2) Calculation of total overhead cost applied to Job 205 (Amt in $)

Particulars	Molding Department	Painting Department
a) Total Predetermined Overhead rate	5.30	14.30
b) Machine hours	300	-
c) Direct Labor hours	-	127
d) Total Overhead cost	1,590 (a*b)	1,816.10 (a*c)

3-a) Calculation of total cost recorded for Job 205 (Amt in $)

Particulars	Molding Department	Painting Department
a) Materials	946	1,140
b) Direct Labor cost	700	950
c) Total overhead cost applied to Job 205	1,590	1,816.10
Total cost recorded for Job 205 (a+b+c)	3,236	3,906.10

3-b) Calculaton of unit product cost (Amount in $)

Particulars	Molding Department	Painting Department
a) Total cost recorded for Job 205	3,236	3,906.10
b) Units	38	38
c) Cost per unit (a/b)	85.16	102.79

4) Calculation of underapplied or overapplied overhead (Amt in $)

Particulars	Molding Department	Painting Department
Total Predetermined overehead rate	5.30	14.30
Standard manufacturing overhead (a)	(87,000 machine hrs*$5.30) = 461,100	(50,600 labor hrs*$14.30) = 723,580
Actual manufacturing overhead (b)	470,840	821,700
Over/(Under) Applied overehad (b-a)	9,740	98,120