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		38,500			50,300
Machine-hours		81,000			33,000
Fixed manufacturing overhead cost	$	243,000		$	508,030
Variable manufacturing overhead per machine-hour	$	2.20			-
Variable manufacturing overhead per direct labor-hour		-		$	4.20

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		89			125
Machine-hours		380			70
Direct materials	$	944		$	1,120
Direct labor cost	$	730		$	1,010

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 30 units, what would be the unit product cost?

Answer 1

1)
	Molding Department	Painting Department
Fixed Overhead rate per hour	$ 3 ( $ 243,000 / 81,000 MH )	$ 10.10 ( $ 508,030 / 50,300 )
Add: Variable Manufacturing overhead per hour	$ 2.20	$ 4.20
Predetermined overhead rate per hour	$ 5.20	$ 14.30
2)
Particulars	Cost Applied
Molding Department ( 380 MH x $ 5.20 )	$ 1,976
Painting Department ( 125 DLH x $ 14.30 )	$ 1,787.50
Total Overhaed Cost applied	$ 3,763.50
3-a)
Particulars	Molding Department	Painting Department	Total
Direct Materials	$ 944	$ 1,120	$ 2,064
Direct Labor	$ 730	$ 1,010	$ 1,740
Manufacturing Overhead	$ 1,976	$ 1,787.50	$ 3,763.50
Total cost	$ 3,650	$ 3,917.50	$ 7,567.50
3-b)
Unit Product Cost             = Total Cost / Total Units             =   $ 7,567.50 / 30 units	$ 252.25