Question

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		31,500			57,700
Machine-hours		88,000			38,000
Fixed manufacturing overhead cost	$	167,200		$	501,990
Variable manufacturing overhead per machine-hour	$	2.80			-
Variable manufacturing overhead per direct labor-hour		-		$	4.80

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		75			133
Machine-hours		330			68
Direct materials	$	934		$	1,200
Direct labor cost	$	730		$	970

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 39 units, what would be the unit product cost?

Answer 1

Answer 1.

Molding Department:

Estimated manufacturing overhead = Estimated variable manufacturing overhead per machine hour * Estimated machine hours + Estimated fixed manufacturing overhead
Estimated manufacturing overhead = $2.80 * 88,000 + $167,200
Estimated manufacturing overhead = $413,600

Predetermined overhead rate = Estimated manufacturing overhead / Estimated machine hours
Predetermined overhead rate = $413,600 / 88,000
Predetermined overhead rate = $4.70 per machine hour

Painting Department:

Estimated manufacturing overhead = Estimated variable manufacturing overhead per direct labor hour * Estimated direct labor hours + Estimated fixed manufacturing overhead
Estimated manufacturing overhead = $4.80 * 57,700 + $501,990
Estimated manufacturing overhead = $778,950

Predetermined overhead rate = Estimated manufacturing overhead / Estimated direct labor hours
Predetermined overhead rate = $778,950 / 57,700
Predetermined overhead rate = $13.50 per direct labor hour

Answer 2.

Job 205:

Molding Department:

Overhead cost applied = Predetermined overhead rate * Number of machine hours
Overhead cost applied = $4.70 * 330
Overhead cost applied = $1,551

Painting Department:

Overhead cost applied = Predetermined overhead rate * Number of direct labor hours
Overhead cost applied = $13.50 * 133
Overhead cost applied = $1,795.50

Total overhead cost applied = Overhead cost applied for molding department + Overhead cost applied for painting department
Total overhead cost applied = $1,551 + $1,795.50
Total overhead cost applied = $3,346.50

Answer 3-a.

Job 205:

Molding Department:

Manufacturing cost = Direct materials + Direct labor + Overhead cost applied
Manufacturing cost = $934 + $730 + $1,551
Manufacturing cost = $3,215

Painting Department:

Manufacturing cost = Direct materials + Direct labor + Overhead cost applied
Manufacturing cost = $1,200 + $970 + $1,795.50
Manufacturing cost = $3,965.50

Total manufacturing cost = Manufacturing cost for molding department + Manufacturing cost for painting department
Total manufacturing cost = $3,215 + $3,965.50
Total manufacturing cost = $7,180.50

Answer 3-b.

Unit product cost = Total manufacturing cost / Number of units produced
Unit product cost = $7,180.50 / 39
Unit product cost = $184.12