Question

Hultquist Corporation has two manufacturing departments--Forming and Customizing. The company used the following data at the beginning of the period to calculate predetermined overhead rates:

	Forming		Customizing		Total
Estimated total machine-hours (MHs)		5,000		5,000		10,000
Estimated total fixed manufacturing overhead cost	$	10,500	$	15,000	$	25,500
Estimated variable manufacturing overhead cost per MH	$	2.00	$	4.00

During the period, the company started and completed two jobs--Job C and Job L. Data concerning those two jobs follow:

	Job C		Job L
Direct materials	$	16,200	$	9,500
Direct labor cost	$	22,900	$	9,900
Forming machine-hours		2,700		2,300
Customizing machine-hours		400		4,600

Required:

a. Assume that the company uses a plantwide predetermined manufacturing overhead rate based on machine-hours. Calculate that overhead rate. (Round your answer to 2 decimal places.)

b. Assume that the company uses a plantwide predetermined manufacturing overhead rate based on machine-hours. Calculate the amount of manufacturing overhead applied to Job L. (Do not round intermediate calculations.)

c. Assume that the company uses a plantwide predetermined manufacturing overhead rate based on machine-hours. Calculate the total manufacturing cost assigned to Job L. (Do not round intermediate calculations.)

d. Assume that the company uses a plantwide predetermined manufacturing overhead rate based on machine-hours and uses a markup of 80% on manufacturing cost to establish selling prices. Calculate the selling price for Job L. (Do not round intermediate calculations.)

e. Assume that the company uses departmental predetermined overhead rates with machine-hours as the allocation base in both departments. What is the departmental predetermined overhead rate in the Forming department? (Round your answer to 2 decimal places.)

f. Assume that the company uses departmental predetermined overhead rates with machine-hours as the allocation base in both production departments. What is the departmental predetermined overhead rate in the Customizing department? (Round your answer to 2 decimal places.)

g. Assume that the company uses departmental predetermined overhead rates with machine-hours as the allocation base in both production departments. How much manufacturing overhead will be applied to Job L? (Do not round intermediate calculations.)

h. Assume that the company uses departmental predetermined overhead rates with machine-hours as the allocation base in both production departments. Further assume that the company uses a markup of 80% on manufacturing cost to establish selling prices. Calculate the selling price for Job L. (Do not round intermediate calculations.)

Answer 1

Answer a
Total Manufacturing Overhead cost = Fixed overheads + Variable overheads = $25500 + {[5000 MH * $2]+[5000 MH * $4]} = $55500
Plantwide predetermined manufacturing overhead rate = Total manufacturing overhead cost / Total machine hours
Plantwide predetermined manufacturing overhead rate = $55,500 / 10000 machine hours = $5.55 per machine hour
Answer b
Amount of manufacturing overhead applied to Job L = Total machine hours required * overhead rate
Amount of manufacturing overhead applied to Job L = 6900 machine hours * $5.55 = $38,295
Answer c
Total manufacturing cost assigned to Job L
Direct Material	$9,500
Direct Labour	$9,900
Overhead applied	$38,295
Total manufacturing cost assigned to Job L	$57,695
Answer d
Selling price for Job L
Total Manufacturing Cost	$57,695.00
Add : 80% Margin	$46,156.00
Selling price for Job L	$103,851.00
Answer e
The departmental predetermined overhead rate in the Forming department = Fixed Overhead rate + Variable overhead rate
The departmental predetermined overhead rate in the Forming department = [$10500/5000 MH] + $2 = $4.10 per machine hour
Answer f
The departmental predetermined overhead rate in the Customizing department = Fixed Overhead rate + Variable overhead rate
The departmental predetermined overhead rate in the Customizing department = [$15000/5000 MH] + $4 = $7 per machine hour
Answer g
Manufacturing overhead cost applied to Job L
Forming department cost applied (2300 hours * $4.10)			$9,430.00
Customizing department cost applied (4600 hours * $7)			$32,200.00
Total Manufacturing overhead cost applied to Job L			$41,630.00
Answer h
Selling price for Job L
Direct Material	$9,500
Direct Labour	$9,900
Overhead applied	$41,630
Total manufacturing cost assigned to Job L	$61,030
Add : 80% Margin	$48,824
Selling price for Job L	$109,854