Question

High Desert Potteryworks makes a variety of pottery products that it sells to retailers. The company uses a job-order costing system in which departmental predetermined overhead rates are used to apply manufacturing overhead cost to jobs. The predetermined overhead rate in the Molding Department is based on machine-hours, and the rate in the Painting Department is based on direct labor-hours. At the beginning of the year, the company provided the following estimates:

	Department
	Molding			Painting
Direct labor-hours		30,500			57,900
Machine-hours		86,000			33,000
Fixed manufacturing overhead cost	$	240,800		$	538,470
Variable manufacturing overhead per machine-hour	$	2.80			-
Variable manufacturing overhead per direct labor-hour		-		$	4.80

Job 205 was started on August 1 and completed on August 10. The company's cost records show the following information concerning the job:

	Department
	Molding			Painting
Direct labor-hours		80			133
Machine-hours		360			68
Direct materials	$	942		$	1,160
Direct labor cost	$	700		$	990

Required:

1. Compute the predetermined overhead rates used in the Molding Department and the Painting Department.

2. Compute the total overhead cost applied to Job 205.

3-a. What would be the total manufacturing cost recorded for Job 205?

3-b. If the job contained 27 units, what would be the unit product cost?

Answer 1

1)

Predetermined overhead rate:

Molding department: $2.80 + ($240,800 / 86,000) = $5.60 per MH

Painting department: $4.80 + ($538,470 / 57,900) = $14.10 per DLH

2)

Molding = 360 X $5.60 = $2,016

Painting = 133 X $14.10 = $1,875.30

Total overhead cost = $2,016 + $1,875.30 = $3,891.30

3-a)

	Molding	Painting	Total
Direct material	$942	$1,160	$2,102
Direct labor	$700	$990	$1,690
Manufacturing overhead	$2,016	$1,875.30	$3,891.30
Total cost	$3,658	$4,025.30	$7,683.30

3-b)

Unit product cost = $7,683.30 / 27 = $284.57