Question

Ronson Corporation has two manufacturing departments--Casting and Customizing. The company used the following data at the beginning of the year to calculate predetermined overhead rates:

	Casting		Customizing		Total
Estimated total machine-hours (MHs)		5,000		5,000		10,000
Estimated total fixed manufacturing overhead cost	$	27,500	$	10,500	$	38,000
Estimated variable manufacturing overhead cost per MH	$	1.70	$	2.60

During the most recent month, the company started and completed two jobs--Job C and Job G. There were no beginning inventories. Data concerning those two jobs follow:

	Job C		Job G
Direct materials	$	10,600	$	6,800
Direct labor cost	$	23,700	$	7,900
Casting machine-hours		3,400		1,600
Customizing machine-hours		2,000		3,000

Assume that the company uses a plantwide predetermined manufacturing overhead rate based on machine-hours. The amount of manufacturing overhead applied to Job C is closest to: (Round your intermediate calculations to 2 decimal places.)

a. $32,130

b. $11,900

c. $20,230

d. $20,520

(please show how to do with formula and steps thank you)

Answer 1

• Working 1: Calculation of total estimated variable overhead

Working		Casting	Customisation	Total
A	Variable overhead per MH	$                       1.70	$                     2.60
B	Estimated machine hours	5,000	5,000
C = A x B	Total Variable Overhead	$             8,500.00	$           13,000.00	$           21,500.00

• Working 2: Calculation of Predetermined Overhead rate

A [calculated in working 1]	Estimated Variable Overheads	$            21,500.00
B	Estimated Fixed Overheads	$            38,000.00
C = A+B	Total Overhead	$            59,500.00
D	Estimated total machine hours	10,000
E = C/D	Plantwide Predetermined Overhead rate	$                       5.95 per MHs

• Answer

A = 3400 + 2000	Total Machine hours for Job C	5,400
B	Plantwide Predetermined Overhead rate	$                       5.95
C = A x B	Overhead applied to Job C	$            32,130.00
	Correct Answer	Option 'a' $ 32,130