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		30,000			55,500
Machine-hours		89,000			30,000
Fixed manufacturing overhead cost	$	231,400		$	499,500
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		70			127
Machine-hours		350			66
Direct materials	$	940		$	1,100
Direct labor cost	$	740		$	1,000

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 24 units, what would be the unit product cost?

Answer 1

1.

Predetermined overhead rate = Estimated manufacturing overhead / Estimated machine hours / direct labor hours

Molding = $231,400+(89,000*$2.80) / 89,000

Molding = $231,400+249,200 / 89,000 = $5.4 per machine hour

Painting = $499,500+(55,500*$4.80) / 55,500

Painting = $499,500+266,400 / 55,500 = $13.8 per direct labor hour

2.

Total overhead cost applied to Job 205:

Molding = 350*$5.4 = $1,890

Painting = 127*$13.8 = $1,752.6

Total overhead cost applied to Job 205 = $3,642.6 o

3.

	Job 205
Direct materials ($940+1,100)	$2,040
Direct labor ($740+1,000)	1,740
Manufacturing overhead applied	3,642.6
Total manufacturing costs	$7,422.6

Unit product cost = $7,422.6 / 24 = $309.275 per unit