Question

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

	Forming		Customizing		Total
Estimated total machine-hours (MHs)		9,000		1,000		10,000
Estimated total fixed manufacturing overhead cost	$	18,900	$	2,900	$	21,800
Estimated variable manufacturing overhead cost per MH	$	1.50	$	3.00

During the period, the company started and completed two jobs--Job C and Job L. Data concerning those two jobs follow:

	Job C		Job L
Direct materials	$	15,300	$	9,000
Direct labor cost	$	22,100	$	9,100
Forming machine-hours		2,500		6,500
Customizing machine-hours		500		500

Required:

a. Assume that the company uses a plantwide predetermined manufacturing overhead rate based on machine-hours. Calculate that overhead rate. (Round your answer to 2 decimal places.)

b. Assume that the company uses a plantwide predetermined manufacturing overhead rate based on machine-hours. Calculate the amount of manufacturing overhead applied to Job L. (Do not round intermediate calculations.)

c. Assume that the company uses a plantwide predetermined manufacturing overhead rate based on machine-hours. Calculate the total manufacturing cost assigned to Job L. (Do not round intermediate calculations.)

d. Assume that the company uses a plantwide predetermined manufacturing overhead rate based on machine-hours and uses a markup of 20% on manufacturing cost to establish selling prices. Calculate the selling price for Job L. (Do not round intermediate calculations.)

e. Assume that the company uses departmental predetermined overhead rates with machine-hours as the allocation base in both departments. What is the departmental predetermined overhead rate in the Forming department? (Round your answer to 2 decimal places.)

f. Assume that the company uses departmental predetermined overhead rates with machine-hours as the allocation base in both production departments. What is the departmental predetermined overhead rate in the Customizing department? (Round your answer to 2 decimal places.)

g. Assume that the company uses departmental predetermined overhead rates with machine-hours as the allocation base in both production departments. How much manufacturing overhead will be applied to Job L? (Do not round intermediate calculations.)

h. Assume that the company uses departmental predetermined overhead rates with machine-hours as the allocation base in both production departments. Further assume that the company uses a markup of 20% on manufacturing cost to establish selling prices. Calculate the selling price for Job L. (Do not round intermediate calculations.)

Answer 1

Answer a.

Forming Department:

Estimated manufacturing overhead = Estimated variable manufacturing overhead per machine hour * Estimated machine hours + Estimated fixed manufacturing overhead
Estimated manufacturing overhead = $1.50 * 9,000 + $18,900
Estimated manufacturing overhead = $32,400

Customizing Department:

Estimated manufacturing overhead = Estimated variable manufacturing overhead per machine hour * Estimated machine hours + Estimated fixed manufacturing overhead
Estimated manufacturing overhead = $3.00 * 1,000 + $2,900
Estimated manufacturing overhead = $5,900

Total estimated manufacturing overhead = $32,400 + $5,900
Total estimated manufacturing overhead = $38,300

Predetermined overhead rate = Total estimated manufacturing overhead / Total estimated machine hours
Predetermined overhead rate = $38,300 / 10,000
Predetermined overhead rate = $3.83 per machine hour

Answer b.

Job L:

Actual machine hours = Forming machine hours + Customizing machine hours
Actual machine hours = 6,500 + 500
Actual machine hours = 7,000

Manufacturing overhead applied = Predetermined overhead rate * Actual machine hours
Manufacturing overhead applied = $3.83 * 7,000
Manufacturing overhead applied = $26,810

Answer c.

Job L:

Total manufacturing cost = Direct materials + Direct labor + Manufacturing overhead applied
Total manufacturing cost = $9,000 + $9,100 + $26,810
Total manufacturing cost = $44,910

Answer d.

Job L:

Selling price = Manufacturing cost + Markup
Selling price = $44,910 + 20% * $44,910
Selling price = $53,892

Answer e.

Forming Department:

Estimated manufacturing overhead = Estimated variable manufacturing overhead per machine hour * Estimated machine hours + Estimated fixed manufacturing overhead
Estimated manufacturing overhead = $1.50 * 9,000 + $18,900
Estimated manufacturing overhead = $32,400

Departmental predetermined overhead rate = Estimated manufacturing overhead / Estimated machine hours
Departmental predetermined overhead rate = $32,400 / 9,000
Departmental predetermined overhead rate = $3.60 per machine hour

Answer f.

Customizing Department:

Estimated manufacturing overhead = Estimated variable manufacturing overhead per machine hour * Estimated machine hours + Estimated fixed manufacturing overhead
Estimated manufacturing overhead = $3.00 * 1,000 + $2,900
Estimated manufacturing overhead = $5,900

Departmental predetermined overhead rate = Estimated manufacturing overhead / Estimated machine hours
Departmental predetermined overhead rate = $5,900 / 1,000
Departmental predetermined overhead rate = $5.90 per machine hour

Answer g.

Job L:

Manufacturing overhead applied = $3.60 * 6,500 + $5.90 * 500
Manufacturing overhead applied = $26,350

Answer h.

Job L:

Total manufacturing cost = Direct materials + Direct labor + Manufacturing overhead applied
Total manufacturing cost = $9,000 + $9,100 + $26,350
Total manufacturing cost = $44,450

Selling price = Manufacturing cost + Markup
Selling price = $44,450 + 20% * $44,450
Selling price = $53,340