Question

Mason Company has two manufacturing departments—Machining and Assembly. The company considers all of its manufacturing overhead costs to be fixed costs. It provided the following estimates at the beginning of the year as well as the following information with respect to Jobs A and B:

Estimated DataMachiningAssemblyTotalManufacturing overhead$12,500,000 $625,000 $13,125,000 Direct labor hours 25,000  500,000  525,000 Machine hours 500,000  20,000  520,000

Job AMachiningAssemblyTotalDirect labor hours51015Machine hours11213

Job BMachiningAssemblyTotalDirect labor hours459Machine hours12315

Required:

1. If Mason Company uses a plantwide predetermined overhead rate with direct labor-hours as the allocation base, how much manufacturing overhead cost would be applied to Job A? Job B? (Round your answers to the nearest whole dollar amount.)

2. Assume that Mason Company uses departmental predetermined overhead rates. The Machining Department is allocated based on machine-hours and the Assembly Department is allocated based on direct labor-hours. How much manufacturing overhead cost would be applied to Job A? Job B? (Round your intermediate calculations and final answers to 2 decimal places.)

Answer 1

Required 1 :
1)	Manufacturing Overhead applied Job A	$ 375
	Manufacturing Overhead applied Job B	$ 225

Explanation :

Plant wide Predetermined Overhead rate = Total Estimated Manufacturing Overhead / Total Estimated Direct Labor Hours

Plant wide Predetermined Overhead rate = $ 13,125,000 / 525,000 Direct Labor Hours

Plant wide Predetermined Overhead rate = $ 25 Per Direct Labor Hour

Manufacturing Overhead applied Job A =Total Estimated Direct labor hours for Job A * Plant wide Predetermined Overhead Rate

Manufacturing Overhead applied Job A = 15 Direct Labor Hours * $ 25 Per Direct Labor Hour

Manufacturing Overhead applied Job A = $ 375

Manufacturing Overhead applied Job B =Total Estimated Direct labor hours for Job B * Plant wide Predetermined Overhead Rate

Manufacturing Overhead applied Job B = 9 Direct Labor Hours * $ 25 Per Direct Labor Hour

Manufacturing Overhead applied Job B = $ 225

Required 2 :
2)	Manufacturing Overhead applied Job A	$ 287.50
	Manufacturing Overhead applied Job B	$ 306.25

Explanation:

Departmental Predetermined Overhead rate

For Machining = Manufacturing Overhead for Job A / Machine hours for Job A

For Machining = $ 12,500,000 / 500,000 Machine hours

For Machining = $ 25 Per Machine hour

For Assembly = Manufacturing Overhead for Job B / Direct Labor hours for Job B

For Assembly = $ 625,000 / 500,000 Direct Labor hours

For Assembly = $ 1.25 Per Direct Labor hour

Manufacturing Overhead applied Job A = (Machine Hours for Job A * rate per Machine Hour )+ (Direct labor hours for Job A * Rate per Direct Labor Hour)

Manufacturing Overhead applied Job A = ( 11 Machine Hours * $25 per Machine Hour )+ ( 10 Direct labor hours * $1.25 per Direct Labor Hour)

Manufacturing Overhead applied Job A = $ 275 + $12.5

Manufacturing Overhead applied Job A = $ 287.50

Manufacturing Overhead applied Job B = (Machine Hours for Job B * rate per Machine Hour )+ (Direct labor hours for Job B * Rate per Direct Labor Hour)

Manufacturing Overhead applied Job B = ( 12 Machine Hours * $25 per Machine Hour )+ ( 5 Direct labor hours * $1.25 per Direct Labor Hour)

Manufacturing Overhead applied Job B = $ 300 + $6.25

Manufacturing Overhead applied Job B = $ 306.25