Question

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

	Machining		Finishing		Total
Estimated total machine-hours (MHs)		8,000		8,000		16,000
Estimated total fixed manufacturing overhead cost	$	4,400	$	39,200	$	43,600
Estimated variable manufacturing overhead cost per MH	$	2.60	$	3.00

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

	Job B		Job K
Direct materials	$	13,900	$	7,800
Direct labor cost	$	21,000	$	2,500
Machining machine-hours		5,000		3,000
Finishing machine-hours		1,000		7,000

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 B. (Do not round intermediate calculations.)

c. Assume that the company uses a plantwide predetermined manufacturing overhead rate based on machine-hours. Calculate the amount of manufacturing overhead applied to Job K. (Do not round intermediate calculations. Round your answer to the nearest whole dollar amount.)

d. 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 Machining department? (Round your answer to 2 decimal places.)

e. 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 Finishing 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. How much manufacturing overhead will be applied to Job B? (Do not round intermediate calculations.)

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 K?. (Do not round intermediate calculations.)

Answer 1

(a) Plant wide predetermined manufacturing overhead rate based on machine hours is as follows :

=[ Total fixed manufacturing overheads + Total variable manufacturing overheads ] / Total machine hours

= [40,600 + [ 2.60 * 6,000 ] + [ 4,000 * 5 ]] / 10,000 = [ 40,600 + 15,600 + 20,000 ] / 10,000 = 7.62 = $ 7.62 per machine hour

(b) As the Company is using plant wide predetermined manufacturing overhead rate based on machine hours then manufacturing overhead applied to Job B is as follows :

= Total machine hours in Job B * Predetermined manufacturing overhead rate per machine hour = [ 2,500 + 2,500 ] * 7.62 = 38,100 = $ 38,100

(c) As the Company is using plant wide predetermined manufacturing overhead rate based on machine hours then manufacturing overhead applied to Job K is as follows :

= Total machine hours in Job K * Predetermined manufacturing overhead rate per machine hour

= [ 4,000 + 1,000 ] * 7.62 = 38,100 = $ 38,100

(d) Departmental predetermined overhead rate in machining department is as follows :

= [Total fixed manufacturing overhead in machining department + Total variable overhead in machining department] / Total machine hours in machining department

= [ 16,200 + [ 6,000 * 2.60 ] ] / 6,000 = 5.30 = $ 5.30 per machine hour

(e) Departmental predetermined overhead rate in finishing department is as follows :

= [Total fixed manufacturing overhead in finishing department + Total variable manufacturing overhead in finishing department] / Total machine hours in finishing department

= [ 24,400 + [ 4,000 * 5 ] ] / 4,000 = 11.10 = $ 11.10 per machine hour

(f) As the Company is using departmental predetermined overhead rate based on machine hours then manufacturing overhead applied to Job B is as follows :

= [ 2,500 * 5.30 ] + [ 2,500 * 11.10 ] = 13,250 + 27,750 = 41,000 = $ 41,000

(g) As the Company is using departmental predetermined overhead rate based on machine hours then manufacturing overhead applied to Job K is as follows :

= [ 4,000 * 5.30 ] + [ 1,000 * 11.10 ] = 21,200 + 11,100 = 32,300 = $ 32,300