Question

In: Accounting

High Desert Potteryworks makes a variety of pottery products that it sells to retailers. The company...

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

38,000

53,800

Machine-hours

84,000

33,000

Fixed manufacturing overhead cost

$

168,000

$

494,960

Variable manufacturing overhead per machine-hour

$

3.00

-

Variable manufacturing overhead per direct labor-hour

-

$

5.00

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

78

130

Machine-hours

370

69

Direct materials

$

944

$

1,100

Direct labor cost

$

740

$

960

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 21 units, what would be the unit product cost?


Solutions

Expert Solution

Answer to Part 1.

Predetermined Overhead Rate = Estimated Manufacturing Overhead Cost / Estimated Hours

Molding Department:

Estimated Manufacturing Overhead Cost = Fixed Manufacturing Overhead Cost + Variable Manufacturing Overhead Cost
Variable Manufacturing Overhead Cost = $3.00 * 84,000 = $252,000
Estimated Manufacturing Overhead Cost = $168,000 + $252,000
Estimated Manufacturing Overhead Cost = $420,000

Predetermined Overhead Rate = 420,000 / 84,000
Predetermined Overhead Rate = $5 per MH

Painting Department:

Estimated Manufacturing Overhead Cost = Fixed Manufacturing Overhead Cost + Variable Manufacturing Overhead Cost
Variable Manufacturing Overhead Cost = $5.00 * 53,800 = $269,000
Estimated Manufacturing Overhead Cost = $494,960 + $269,000
Estimated Manufacturing Overhead Cost = $763,960

Predetermined Overhead Rate = 763,960 / 53,800
Predetermined Overhead Rate = $14.20 per DLH

Answer to Part 2.

Total Overhead Cost applied to Job 205 = Molding Department Overhead applied + Painting Department Overhead applied
Molding Department Overhead applied = 370 * $5 = $1,850
Painting Department Overhead applied = 130 * $14.20 = $1,846

Total Overhead Cost applied to Job 205 = $1,850 + $1,846
Total Overhead Cost applied to Job 205 = $3,696

Answer to Part 3-a.

Answer to Part 3-b.

Unit Product Cost = Total Manufacturing Cost / No. of Units in Job
Unit Product Cost =7,440 / 21
Unit Product Cost = $354.29


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