Question

Problem 2-19 Multiple Predetermined Overhead Rates; Applying Overhead [LO2-1, LO2-2, LO2-4]

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		34,500			52,600
Machine-hours		80,000			38,000
Fixed manufacturing overhead cost	$	152,000		$	473,400
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		89			127
Machine-hours		310			73
Direct materials	$	948		$	1,160
Direct labor cost	$	740		$	970

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 31 units, what would be the unit product cost?

Predetermined Overhead Rate Molding Department per MH Painting Department per DLH

• Total overhead cost $

• Department Moldingnot attempted Painting Total Direct materials $ Direct labor Manufacturing overhead Total cost $ $ $

• 	Unit product cost    per unit

Answer 1

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

Molding Department:

Predetermined overhead rate = [(Fixed manufacturing overhead cost / Machine-hours) + Variable manufacturing overhead per machine-hour]

= [($152,000 / 38,000 hrs) + $3]

= $1.9 + $3

= $4.9 per machine hours

________________________________________

Painting Department:

Predetermined overhead rate = [(Fixed manufacturing overhead cost / Direct labor hours) + Variable manufacturing overhead per direct labor-hour

= [($473,400 / 52,600 hrs) + $5]

= $9 + $5

= $14 per direct labor hours

_____________________________________________

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

Molding Department	[310 machine hours * $4.9]	$1,519
Painting Department	[127 direct labor hours * $14]	$1,778
Total overhead cost		$3,297

__________________________________________

3-a. Compute the total manufacturing cost recorded for Job 205:

Direct Material [$948 + $1160]	$2,108
Direct Labor [$740 + $970]	$1,710
Manufacturing overhead	$3,297
Total manufacturing cost	$7,115

_________________________________________

3-b. If the job contained 31 units, compute the unit product cost:

Unit product cost = $7115 / 31 units

= $229.51 per unit