Question

Collini Corporation has two production departments, Machining and Customizing. The company uses a job-order costing system and computes a predetermined overhead rate in each production department. The Machining Department’s predetermined overhead rate is based on machine-hours and the Customizing Department’s predetermined overhead rate is based on direct labor-hours. At the beginning of the current year, the company had made the following estimates:

	Machining		Customizing
Machine-hours		17,000		15,000
Direct labor-hours		3,000		6,000
Total fixed manufacturing overhead cost	$	102,000	$	61,200
Variable manufacturing overhead per machine-hour	$	1.70
Variable manufacturing overhead per direct labor-hour			$	4.10

During the current month the company started and finished Job T268. The following data were recorded for this job:

Job T268:	Machining		Customizing
Machine-hours		80		30
Direct labor-hours		30		50
Direct materials	$	720	$	380
Direct labor cost	$	900	$	1,500

The total job cost for Job T268 is closest to: (Round your intermediate calculations to 2 decimal places.)

Garrison 16e Rechecks 2017-06-28

Multiple Choice

$4,831

$2,595

$616

$2,236

Answer 1

Solution:

Predtermined overhead rate for machining Department = Fixed Manufacturing Overhead per Machine Hour + Variable Manufacturing Overhead per Machine Hour

= ($102,000 /17000) + $1.70 = $6 +$1.70 = $7.70

Predtermined overhead rate for Customizing Department = Fixed Manufacturing Overhead per Direct labor Hour + Variable Manufacturing Overhead per direct labor Hour

= ($61200/ 6000) + $4.10 = $10.20 + $4.10 = $14.30

Total Cost For Job T268 = cost of Machinig department + cost of Customizing department

Cost of machining department assigned to Job T268 = Direct Material +Direct labor cost + Manufacturing overhead

= $720 + $900 + (80 Hours * $7.70) = $2,236

Cost of Customizing department assigned to Job T268 = Direct Material +Direct labor cost + Manufacturing overhead

= $380 + $1500 + (50 Hours * $14.30) = $2,595

Total Job cost for Job T268 = $2236 + $2595 = $4,831

Hence 1st option "$4,831" is correct answer.