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		16,250			68,500
Machine-hours		87,000			9,700
Direct materials cost	$	527,000		$	667,000
Direct labour cost	$	162,500		$	479,500
Manufacturing overhead cost	$	896,100		$	815,150

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		35			150
Machine-hours		160			25
Materials placed into production	$	460		$	322
Direct labour cost	$	280		$	670

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 70 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		11,700			63,700
Machine-hours		66,700			10,700
Direct materials cost	$	447,000		$	697,000
Direct labour cost	$	125,000		$	453,000
Manufacturing overhead cost	$	699,710		$	753,500

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

1	Predetermined Overhead Rate
	Moulding Department = 10.3 per machine hour
	Painting Department = 170% of Direct Labor Cost
2	Overhead cost applied in Job 205 = $2,787
3a	Total Cost of Job 205= $4,519
3b	Cost Per Unit= $64.56
4	Under/Over applied Overhead
	Moulding Department = $12,700 Underapplied
	Painting Department = $16,600 Overapplied
Workings:
1	Predetermined Overhead Rate
	Moulding Department:
	Basis : Machine Hour
	Predetermined Overhead Rate= Manufacturing Overhead/ Machine Hour
	(8,96,100/87,000)= 10.3 Per Machine Hour
	Painting Department
	Basis : Direct Labor Cost
	Predetermined Overhead Rate= Manufacturing Overhead/ Direct Labor Cost
	(8,15,150/4,79,500)*100 = 170% Direct Labor Cost
2	Overhead Cost applied to Job 205
	Ovehead in Moulding Department (160*10.3)	1,648
	Ovehead in Painting Department (670*170%)	1,139
	Total Overhead Cost applied in Job 205	2,787
3a	Total Cost Recorded for Job 205
		Department
		Moulding	Painting	Total
	Direct Material	460	322	782
	Direct Labor	280	670	950
	Manufacturing Overhead applied	1648	1139	2787
	Total Cost for Job 205	2388	2131	4519
3b	Cost Per Unit
	Total Cost	4519
	Number of Unit	70
	Cost per Unit	64.56
4	Under/Over applied Overhead
	Moulding Department:
	Applied Overhead (66700*10.3)	6,87,010
	Actual Overhead	6,99,710
	Underapplied	12,700
	Painting Department
	Applied Overhead (4,53,000*170%)	7,70,100
	Actual Overhead	7,53,500
	Overapplied	16,600