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		33,000			55,900
Machine-hours		83,000			40,000
Fixed manufacturing overhead cost	$	273,900		$	553,410
Variable manufacturing overhead per machine-hour	$	2.20			-
Variable manufacturing overhead per direct labor-hour		-		$	4.20

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		82			135
Machine-hours		330			71
Direct materials	$	932		$	1,280
Direct labor cost	$	740		$	1,000

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 27 units, what would be the unit product cost?

Answer 1

1. Compute the predetermined overhead rates used in the Molding Department and the Painting Department.

Molding department = Estimated overhead cost/estimated machine hour

= 273900/83000

Molding department = 3.3+2.2 = 5.50 per machine hour

Painting department = Estimated overhead cost/estimated Labour hour

= 553410/55900

Painting department = 9.9+4.2 = 14.10 per labour hour

2. Compute the total overhead cost applied to Job 205.

	Overhead applied
Molding depatment (330*5.5)	1815
Painting department (135*14.1)	1903.5
Total overhead cost	3718.5

3-a. What would be the total manufacturing cost recorded for Job 205?

Direct material	2212
Direct labour	1740
Molding depatment (330*5.5)	1815
Painting department (135*14.1)	1903.5
Total cost	7670.5

3-b. If the job contained 27 units, what would be the unit product cost?

Direct material	2212
Direct labour	1740
Molding depatment (330*5.5)	1815
Painting department (135*14.1)	1903.5
Total cost	7670.5
Unit	27
Unit cost	284.09