Question

Following the instructions on the Data tab, complete the spreadsheet for your Chief Financial Officer.

Estimates at the beginning of the year	Assembly	Production	Total
Manufacturing Overhead Costs	$       480,000	$            528,000	$          108,000
Direct Labor-hours	12,000	7,200	19,200
Machine hours	4,800	24,000	28,800
Job 142
Direct labor-hours	25	17	42
Machine hours	17	20	37
1.   Calculate the amount of manufacturing overhead applied to Job 142. Converse uses a plantwide predetermined overhead rate based on direct labor hours.
2.   The CFO is considering changing the allocation base for Production to machine hours (instead of direct labor hours).   The allocation base for Assembly would continue to be direct labor hours.
Assembly	Production	Total

Answer 1

1	Calculation of predetermined overhead rate
		Assembly	Production	Total
	Manufacturing overhead cost(a)	$4,80,000	$5,28,000	$10,08,000
	Direct labor hours(b)	12000	7200	19200
	Predetermined overhead rate(a/b)	$40.00	$73.33	$52.50
	Manufacturing overhead applied to Job 142
		Assembly	Production	Total
	Predetermined overhead rate	$40.00	$73.33	$52.50
	Direct labor hours for Job 142	25	17	42
	Manufacturing overhead	$1,000.00	$1,246.67	$2,246.67
2	Calculation of predetermined overhead rate
		Assembly	Production	Total
	Manufacturing overhead cost(a)	$4,80,000	$5,28,000	$10,08,000
	Direct labor hours(b)	12000	7200	19200
	Machine Hours©	4800	24000	28800
	Predetermined overhead rate for Assembly(a/b)	$40.00	$73.33	$52.50
	Predetermined overhead rate for Production(a/c)	$100.00	$22.00	$35.00