Question

WoodGrain Technology makes home office furniture from fine hardwoods. The company uses a job-order costing system and predetermined overhead rates to apply manufacturing overhead cost to jobs. The predetermined overhead rate in the Preparation Department is based on machine hours, and the rate in the Fabrication Department is based on direct labor-hours. At the beginning of the year, the company’s management made the following estimates for the year:

      

	Department
	Preparation				Fabrication
Machine-hours		83,000				36,000
Direct labor-hours		34,500				58,800
Direct materials cost	$	194,000			$	204,000
Direct labor cost	$	285,000			$	517,000
Fixed manufacturing overhead cost	$	190,900			$	529,200
Variable manufacturing overhead per machine-hour	$	2.60				-
Variable manufacturing overhead per direct labor-hour		-			$	4.60

Job 127 was started on April 1 and completed on May 12. The company's cost records show the following information concerning the job:

	Department
	Preparation					Fabrication
Machine-hours		380				71
Direct labor-hours		77				134
Direct materials cost	$	934			$	1,140
Direct labor cost	$	730			$	960

Requred:    

1. Compute the predetermined overhead rate used during the year in the Preparation Department. Compute the rate used in the Fabrication Department. (Round predetermined overhead rate to 2 decimal places.)

2. Compute the total overhead cost applied to Job 127. (Round predetermined overhead rate to 2 decimal places and round your final answer to nearest whole dollar.)

   

3-a. What would be the total cost recorded for Job 127? (Round your predetermined overhead rate and intermediate calculations to 2 decimal places and round your final answer to nearest whole dollar.)

     

3-b. If the job contained 22 units, what would be the unit product cost? (Round predetermined overhead rate and final answer to 2 decimal places.)

    

4. At the end of the year, the records of WoodGrain Technology revealed the following actual cost and operating data for all jobs worked on during the year: (Round predetermined overhead rate to 2 decimal places.)

      

	Department
	Preparation				Fabrication
Machine-hours		82,600				23,200
Direct labor-hours		28,000				55,000
Direct materials cost	$	161,300			$	413,000
Manufacturing overhead cost	$	415,540			$	710,900

What was the amount of underapplied or overapplied overhead in each department at the end of the year?

Answer 1

Solution 1:

Predetemined overhead rate - Prepration = Estimated overhead / Estimated machine hours

= ($190,900 + 83000*$2.60) / 83000 = $4.90 per machine hour

Predetemined overhead rate - Fabrication = Estimated overhead / Estimated labor hours

= ($529,200 + 58800*$4.60) / 58800 = $13.60 per labor hour

Solution 2:

Computation of Overhead applied to Job 127
Particulars	Amount
Overhead applied:
Prepration Department (380*$4.90)	$1,862
Fabrication department ($134*$13.60)	$1,822
Total overhead cost applied to Job 127	$3,684

Solution 3:

Computation of Cost charged to Job 127 and unit product cost
Particulars	Prepration	Fabrication	Total
Direct material	$934	$1,140	$2,074
Direct labor	$730	$960	$1,690
Overhead cost applied	$1,862	$1,822	$3,684
Total Cost	$3,526	$3,922	$7,448
Nos of units			22
Per unit cost			$338.55

Solution 4:

Computation of Underapplied (Overapplied) Overhead
Particulars	Prepration	Fabrication
Overhead incurred	$415,540.00	$710,900.00
Overhead applied: Prepration - 82600*$4.90 Litigation - 55,000*$13.60	$404,740.00	$748,000.00
Underapplied (Overapplied) overhead	$10,800.00	-$37,100.00