Question

P3.36A (LO 4, 6) Agassi Company uses a job-order cost system in each of its three manufacturing departments. Manufacturing overhead is applied to jobs on the basis of direct labour cost in Department D, direct labour hours in Department E, and machine hours in Department K.

Calculate predetermined overhead rates, apply overhead, and calculate under- or over-applied overhead.

In establishing the predetermined overhead rates for 2020, the following estimates were made for the year.

		Department
		D		E		K
Manufacturing overhead		$1,200,000		$1,500,000		$900,000
Direct labour costs		$1,500,000		$1,250,000		$450,000
Direct labour hours		100,000		125,000		40,000
Machine hours		400,000		500,000		120,000

During January, the job cost sheets showed the following costs and production data.

		Department
		D		E		K
Direct materials used		$140,000		$126,000		$78,000
Direct labour costs		$120,000		$110,000		$37,500
Manufacturing overhead incurred		$  99,000		$124,000		$79,000
Direct labour hours		8,000		11,000		3,500
Machine hours		34,000		45,000		10,400

Instructions

• a. Calculate the predetermined overhead rate for each department.
• b. Calculate the total manufacturing costs assigned to jobs in January in each department.
• c. Calculate the under- or over-applied overhead for each department at January 31.

Answer 1