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)		9,000		1,000		10,000
Estimated total fixed manufacturing overhead cost	$	18,900	$	2,900	$	21,800
Estimated variable manufacturing overhead cost per MH	$	1.50	$	3.00

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	$	15,300	$	9,000
Direct labor cost	$	22,100	$	9,100
Forming machine-hours		2,500		6,500
Customizing machine-hours		500		500

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 20% 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 20% on manufacturing cost to establish selling prices. Calculate the selling price for Job L. (Do not round intermediate calculations.)

Answer 1

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.)

Answer:

Predetermined overhead rate

3.83

Calculation:

To calculate that overhead rate, first we need to calculate the estimated total overhead costs in the two departments.

So, for forming department:

Estimated fixed manufacturing overhead	18,900
Estimated variable manufacturing overhead	13,500
Estimated total manufacturing overhead cost	32,400

The estimated variable manufacturing overhead is calculated by multiplying Estimated total machine-hours (MHs) with the Estimated variable manufacturing overhead cost per MH. That is : 9,000 x 1.5 = 13,500

Customizing department:

Estimated fixed manufacturing overhead	2,900
Estimated variable manufacturing overhead	3000
Estimated total manufacturing overhead cost	5,900

The estimated variable manufacturing overhead is calculated by multiplying Estimated total machine-hours (MHs) with the Estimated variable manufacturing overhead cost per MH. That is : 1,000 x 3 = 3,000

Then we need to calculate the over head rate. For that we need to divide the Estimated total manufacturing overhead cost with the Estimated total machine hours. That is :

Estimated total manufacturing overhead cost (a)	38,300
Estimated total machine hours (b)	10,000
Predetermined overhead rate (a)/(b)	3.83

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.)

Answer:

Manufacturing overhead applied to Job L

26,810

Calculation:

To calculate the amount of overhead applied to Job L we need to multiply the Predetermined overhead rate with the Machine-hours incurred by the job. That is:

Overhead applied to a particular job = Predetermined overhead rate × Machine-hours incurred by the job

= $3.83 per MH × (6,500 MHs + 500  MHs)  

= $3.83 per MH × (7,000 MHs) = $ 26,810

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.)

Answer:

Total manufacturing costs assigned to Job L

$ 44,910

Calculation:

To calculate Job L’s manufacturing cost, we need to sum up the direct materials, direct labor and the manufacturing overhead applied. So that will be:

Direct materials	9,000
Direct labor	9,100
Manufacturing overhead applied	26,810
Total manufacturing costs	$ 44,910

d. Assume that the company uses a plantwide predetermined manufacturing overhead rate based on machine-hours and uses a markup of 20% on manufacturing cost to establish selling prices. Calculate the selling price for Job L. (Do not round intermediate calculations.)

Answer:

Selling price for Job L

$ 53,892

Calculation:

To calculate selling price for Job L, we need to sum the Total manufacturing costs and the mark up which is 20% of the manufacturing cost. That is :

Total manufacturing costs	44,910
Add: Markup (44,910 * 20%)	8,982
Selling price	$ 53,892

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.)

Answer:

Departmental predetermined overhead rate

3.60

Calculation:

To calculate the Forming Department predetermined overhead rate, first we need to calculate the estimated total overhead costs. Then we need to divide it with the Estimated total machine-hours. It is calculated as below:

Estimated fixed manufacturing overhead	18,900
Estimated variable manufacturing overhead	13,500
Estimated total manufacturing overhead cost (a)	32,400
Estimated total machine-hours (b)	9,000
Departmental predetermined overhead rate (a)/(b)	3.6

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.)

Answer:

Departmental predetermined overhead rate

5.90

Calculation:

To calculate the departmental predetermined overhead rate in the Customizing department,  first we need to calculate the estimated total overhead costs. Then we need to divide it with the Estimated total machine-hours. It is calculated as below:

Estimated fixed manufacturing overhead	2,900
Estimated variable manufacturing overhead	3000
Estimated total manufacturing overhead cost (a)	5,900
Estimated total machine-hours (b)	1,000
Departmental predetermined overhead rate (a)/(b)	5.9

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.)

Answer:

Total manufacturing overhead applied to Job L

26,350

Calculation:

To calculate the Manufacturing overhead applied to Job L, we need to add the manufacturing overhead of both Forming and Customizing.

That is to multiply the Departmental predetermined overhead rate with the respective machine-hours.

Forming = $3.60 per MH × 6,500 MHs = 23,400

Customizing = $5.90per MH × 500 MHs = 2,950

So, the Manufacturing overhead applied to Job L is:

Forming	23,400
Customizing	2,950
Total manufacturing overhead applied	26,350

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 20% on manufacturing cost to establish selling prices. Calculate the selling price for Job L. (Do not round intermediate calculations.)

Answer:

Selling price

$53,340

Calculation:

To calculate selling price for Job L, we need to calculate the Total manufacturing costs first. For that we need to add the direct materials, direct labor and the Manufacturing overhead applied.

And after calculating the Total manufacturing costs, we need to find the markup which is 20% of Total manufacturing costs. Then need to add the Total manufacturing costs with the mark up. That is :

Direct materials	9,000
Direct labor	9,100
Manufacturing overhead applied	26,350
Total manufacturing costs	44,450
Add: Markup	8,890
Selling price	$ 53,340