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)		6,000		4,000		10,000
Estimated total fixed manufacturing overhead cost	$	10,200	$	24,400	$	34,600
Estimated variable manufacturing overhead cost per MH	$	2.30	$	4.00

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	$	21,400	$	8,400
Direct labor cost	$	21,600	$	8,400
Machining machine-hours		3,300		2,700
Finishing machine-hours		400		3,600

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.

Assume that the company uses a plantwide predetermined manufacturing overhead rate based on machine-hours. Calculate that overhead rate.

Fixed overheads	$34,600
Variable Overheads [($2.30 × 6,000) + ($4 × 4,000)]	$29,800
Total Overheads	$64,400
÷
Machine hours	10,000
Predetermined overhead rate	$6.44 per MH

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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.

Overhead per MH is $6.44

Total Machine hours required to finish Job B is [3,300 + 400] = 3,700

Manufacturing overhead applied to Job B [3,700 × $6.44] = $23,828

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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.

Overhead per MH is $6.44

Total Machine hours required to finish Job B is [2,700 + 3,600] = 6,300

Manufacturing overhead applied to Job B [6,300 × $6.44] = $40,572

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d.

Assume that the company uses departmental predetermined overhead rates with machine-hours as the allocation base in both departments.

Compute the departmental predetermined overhead rate in the Machining department:

Fixed overheads	$10,200
Variable Overheads [($2.30 × 6,000)]	$13,800
Total Overheads	$24,000
÷
Machine hours	6,000
Predetermined overhead rate	$4.00 per MH

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e.

Assume that the company uses departmental predetermined overhead rates with machine-hours as the allocation base in both production departments.

Compute the departmental predetermined overhead rate in the Finishing department:

Fixed overheads	$24,400
Variable Overheads [($4 × 4,000)]	$16,000
Total Overheads	$40,400
÷
Machine hours	4,000
Predetermined overhead rate	$10.10 per MH

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f.

Assume that the company uses departmental predetermined overhead rates with machine-hours as the allocation base in both production departments.

Compute manufacturing overhead will be applied to Job B:

Overhead per MH for Machining department is $4

Overhead per MH for the Finishing department is $10.10

Total Machine hours required to finish Job B are 3300 hrs in the machining dept. & 400 hrs in the finishing dept.

Manufacturing overhead applied to Job B [(3300 * $4) + (400 * $10.10)] = $17,240

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g. Assume that the company uses departmental predetermined overhead rates with machine-hours as the allocation base in both production departments.

Compute manufacturing overhead will be applied to Job K:

Overhead per MH for Machining department is $4

Overhead per MH for the Finishing department is $10.10

Total Machine hours required to finish Job B are 2700 hrs in the machining dept. & 3600 hrs in the finishing dept.

Manufacturing overhead applied to Job B [(2700 * $4) + (3600 * $10.10)] = $47,160