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		38,000			59,200
Machine-hours		82,000			31,000
Fixed manufacturing overhead cost	$	172,200		$	485,440
Variable manufacturing overhead per machine-hour	$	3.20			-
Variable manufacturing overhead per direct labor-hour		-		$	5.20

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		73			132
Machine-hours		310			68
Direct materials	$	942		$	1,100
Direct labor cost	$	680		$	1,000

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 36 units, what would be the unit product cost?

Answer 1

Ans.1	Molding Department:
	Predetermined overhead rate   = Total estimated manufacturing overhead / Estimated machine hours
		434600 / 82000
		$5.30	per MH
	*Total manufacturing overhead = Fixed manufacturing Overhead + Variable manufacturing Overhead
		$172200 + $262400
		$434,600
	*Variable manufacturing overhead = variable manufacturing overhead per machine hour * machine hours
			$3.20 * 82000
			$262,400
	Painting Department:
	Predetermined overhead rate   = Total estimated manufacturing overhead / Estimated direct labor hours
		793280 / 59200
		$13.40	per DLH
	*Total manufacturing overhead = Fixed manufacturing Overhead + Variable manufacturing Overhead
		$485440 + $307840
		$793,280
	*Variable manufacturing overhead = variable manufacturing overhead per direct labor hour * direct labor hours
			$5.20 * 59200
			307840
Ans.2	Molding Department	$1,643
	Painting Department	$1,769
	Total overhead cost applied	$3,412
	Overhead applied to Molding Department = Predetermined overhead rate * Machine hours incurred
			5.30 * 310
			$1643
	Overhead applied to Painting Department = Predetermined overhead rate * Direct labor hours incurred
			13.40 * 132
			$1769	(rounded)
Ans.3a	Particulars	Amount
	Total direct materials (942+1100)	$2,042
	Total direct labor (680+1000)	$1,680
	Total overhead cost applied	$3,412
	Total manufacturing cost	$7,134
Ans.3b	Unit product cost   = Total manufacturing cost / No. of units
		7134 / 36
		$198.17	Per unit