Question

Problem 2-19 (Algo) Multiple Predetermined Overhead Rates; Applying Overhead [LO2-1, LO2-2, LO2-4]

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		30,500			59,400
Machine-hours		87,000			34,000
Fixed manufacturing overhead cost	$	295,800		$	599,940
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		77			130
Machine-hours		340			74
Direct materials	$	948		$	1,160
Direct labor cost	$	720		$	960

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)	Computation of departmental OH rates
	Particulars			Molding	Painting
	Fixed manufacturing overhead cost			$ 2,95,800.00	$ 5,99,940.00
	Machine-hours			87000
	Direct labor-hours				59400
	Fixed manufacturing overhead per hour			$              3.40	$            10.10
	Variable manufacturing overhead per hour			$              2.20	$              4.20
	Departmental OH rates			$              5.60	$            14.30

2)	Application of overhead costs to Job 205
	Molding:	$ 1,904.00	(340 x $ 5.6)
	Painting:	$ 1,859.00	(130 x $ 14.30)
		$ 3,763.00

3.a)	Computation of total manufacturing cost
	Direct Materials		$ 2,108.00	($ 948 + $ 1160)
	Direct Labor		$ 1,680.00	($ 720 + $ 960)
	Applied OH		$ 3,763.00
			$ 7,551.00

3.b)

Unit product cost

$    251.70

($ 7551 / 30 units)