Question

You are a management internee at the Gadgets Company. The company operates with two Divisions, Xen and Yen and produces designer toy cars. For Division Xen, the management applies overhead costs on the basis of direct labor cost, and for Division Yen, it applies overhead costs on the basis of machine-hours. The company completed Job FIN-E in late 2017. The company’s books reveal the following additional information:

Budgeted Amounts Division Xen Division Yen

Labor cost (Direct)   $283 000 $268 000

Manufacturing overhead   $328 000 $285 000

Machine-hours     61 300 mh            51 400 mh

Actual data for Job FIN-E Division Xen        Division Yen

Direct materials used        $21 100 $26 300

Labor cost (Direct)      $21 500 $24 400

Machine-hours         9500 mh 6300 mh

Required: Your supervisor has asked you to work out the following, showing all your calculations (round off to two decimal places):

The manufacturing overhead rate (budgeted) for Division Xen.

The manufacturing overhead rate (budgeted) for Division Yen.

The total overhead cost (budgeted) allocated to Job FIN-E.

The unit cost for job FIN-E if the Job required Gadgets to produce 1065 designer toy cars.

Answer 1

Requirement 1
The manufacturing overhead rate (budgeted) for Division Xen.
Manufacturing overhead rate = Manufacturing overhead/ Machine hours
= 328,000/61,300
= $ 5.35 per machine hour
Requirement 2
The manufacturing overhead rate (budgeted) for Division Yen.
= 285,000/51,400
= $ 5.54 per machine hour
Requirement 3
The total overhead cost (budgeted) allocated to Job FIN-E
	Division Xen	Division Yen	Total
Machine hours	9500	6300
Manufacturing overhead rate	5.35	5.54
Overhead cost allocated	50825	34902	85727
Requirement 3
The unit cost for job FIN-E if the Job required Gadgets to produce 1065 designer toy cars
	Division Xen	Division Yen	Total
Direct Materials	21100	26300	47400
Direct labor	21500	24400	45900
Overhead cost allocated	50825	34902	85727
Total cost			179027
# of units produced			1065
Unit cost for job FIN-E		(179027/1065)	168.10