Question

WoodGrain Technology makes home office furniture from fine hardwoods. The company uses a job-order costing system and predetermined overhead rates to apply manufacturing overhead cost to jobs. The predetermined overhead rate in the Preparation Department is based on machine hours, and the rate in the Fabrication Department is based on direct labor-hours. At the beginning of the year, the company’s management made the following estimates for the year:

      

	Department
	Preparation				Fabrication
Machine-hours		83,000				32,000
Direct labor-hours		39,000				51,000
Direct materials cost	$	187,000			$	197,000
Direct labor cost	$	281,000			$	522,000
Fixed manufacturing overhead cost	$	190,900			$	479,400
Variable manufacturing overhead per machine-hour	$	2.40				-
Variable manufacturing overhead per direct labor-hour		-			$	4.40

Job 127 was started on April 1 and completed on May 12. The company's cost records show the following information concerning the job:

	Department
	Preparation					Fabrication
Machine-hours		330				74
Direct labor-hours		79				134
Direct materials cost	$	948			$	1,180
Direct labor cost	$	740			$	960

Required:    

1. Compute the predetermined overhead rate used during the year in the Preparation Department. Compute the rate used in the Fabrication Department. (Round predetermined overhead rate to 2 decimal places.)

	Predetermined overhead rare
Preparation department	$	per MH
Fabrication department	$	per DHL

2. Compute the total overhead cost applied to Job 127. (Round predetermined overhead rate to 2 decimal places and round your final answer to nearest whole dollar.)

Total overhead cost

$

3-a. What would be the total cost recorded for Job 127? (Round your predetermined overhead rate and intermediate calculations to 2 decimal places and round your final answer to nearest whole dollar.)

Department

	Preparation	Fabrication	Total
Direct materials	$	$	$
Direct labor
Manufacturing overhead
Total cost	$	$	$

     

3-b. If the job contained 28 units, what would be the unit product cost? (Round predetermined overhead rate and final answer to 2 decimal places.)

Unit product cost

$

per unit

    

4. At the end of the year, the records of WoodGrain Technology revealed the following actual cost and operating data for all jobs worked on during the year: (Round predetermined overhead rate to 2 decimal places.)

      

	Department
	Preparation				Fabrication
Machine-hours		82,700				23,500
Direct labor-hours		25,000				59,000
Direct materials cost	$	165,500			$	416,000
Manufacturing overhead cost	$	398,890			$	778,000

What was the amount of underapplied or overapplied overhead in each department at the end of the year?

Preparation department	Underapplied or overapplied overhead	$ _____
Fabrication department	Underapplied or overapplied overhead	$_____

Answer 1

1	Compute the predetermined overhead rate used during the year in the preparation department
	Preparation Department
	Variable Manufacturing overhead
	(2.4*83000)				199200
	Fixed Manufacturing overhead				190900
	Total manufacting overhead				390100
	Machine hours				83000
	Predetermined overhead rate				4.7
	Fabrication Department
	Variable Manufacturing overhead
	(4.4*51000)				224400
	Fixed Manufacturing overhead				479400
	Total manufacting overhead				703800
	Direct Labor hours				51000
	Predetermined overhead rate				13.8
2	Total Overhead Cost applied to Job 127
					In $
	Overhead cost
	(4.7*330)			1551
	(13.8*134)			1849.2
	Total Cost			3400.2
3 a)					In $
	Direct Materials Cost (948+1180)				2128
	Direct Labor Cost (740+960)				1700
	Overhead cost
	(4.7*330)			1551
	(13.8*134)			1849.2	3400.2
	Total Cost				7228.2
3 b)	Unit Product Cost - 7228.20/28				258.15
4	Preparation Department
	Estimate		390100
	Actual		$398,890
	Underapplied		($8,790)
	Fabrication Department
	Estimate		703800
	Actual		$778,000
	Underapplied		($74,200)