Question

High Desert Potteryworks makes a variety of pottery products that it sells to retailers, such as Home Depot. The company uses a job-order costing system in which predetermined overhead rates are used to apply manufacturing overhead cost to jobs. The predetermined overhead rate in the Moulding Department is based on machine-hours, and the rate in the Painting Department is based on direct labour cost. At the beginning of the year, the company’s management made the following estimates:

	Department
	Moulding			Painting
Direct labour-hours		16,000			68,000
Machine-hours		86,000			9,600
Direct materials cost	$	526,000		$	666,000
Direct labour cost	$	160,000		$	476,000
Manufacturing overhead cost	$	877,200		$	833,000

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
	Moulding			Painting
Direct labour-hours		30			140
Machine-hours		150			20
Materials placed into production	$	520		$	382
Direct labour cost	$	340		$	730

Required:

1. Compute the predetermined overhead rate used during the year in the Moulding Department. Compute the rate used in the Painting Department. (Round "Cost per machine-hour" answer to 2 decimal places.)

2. Compute the total overhead cost applied to Job 205. (Do not round intermediate calculations. Enter your answer rounded to the nearest whole dollar.)

3-a. What would be the total cost recorded for Job 205? (Do not round intermediate calculations. Enter your answers rounded to the nearest whole dollar.)

3-b. If the job contained 60 units, what would be the cost per unit? (Do not round intermediate calculations and round your final answer to 2 decimal places.)

4. At the end of the year, the records of High Desert Potteryworks revealed the following actual cost and operating data for all jobs worked on during the year:

	Department
	Moulding			Painting
Direct labour-hours		11,600			63,600
Machine-hours		66,600			10,600
Direct materials cost	$	446,000		$	696,000
Direct labour cost	$	124,000		$	452,000
Manufacturing overhead cost	$	691,920		$	748,000

What was the amount of under- or overapplied overhead in each department at the end of the year? (Do not round intermediate calculations.)

Answer 1

Required 1 :
	Moulding department
Estimated Manufacturing overhead cost	877200
(/) Estimated Machine hours	86000
Pre-determined overhead rate	10.20	per machine hour
	Painting department
Estimated Manufacturing overhead cost	833000
(/) Estimated direct labor cost	476000
Pre-determined overhead rate	175%	of direct labor cost

Required 2 :
Overhead application :	Job 205
Moulding department [ 10.20 * 150 ]	1530
Painting department [ 175% * 730 ]	1278
Total overhead cost applied	2808

Required 3A :
	Department
	Molding	Painting	Total
Direct materials	520	382	902
Direct labor	340	730	1070
Manufacturing overhead	1530	1278	2808
Total cost	2390	2390	4780

Required 3B :
	Job 205
Total cost	4780
(/) Number of units	60
Cost per unit	79.66

Required 4 :
	Moulding department
Machine hours	66600
(*) Predetermined overhead rate	10.20
Overhead applied	679320
Actual overhead cost	691920
Underapplied overhead	12600
	Painting department
Direct labor cost	452000
(*) Predetermined overhead rate	175%
Overhead applied	791000
Actual overhead cost	748000
Overapplied overhead	43000