Question

C.A.S. has two production departments, Assembly and Customizing. The company used the following estimates to calculate predetermined overhead rates:

                                                                                                Assembly                    Customizing

Total machine hours                                                               19,000                         15,000

Direct labor hours                                                                   4,000                           6,000

Fixed manufacturing overhead                                               $100,700                     $63,000

Variable manufacturing overhead per machine hour             $2.00                           -

Variable manufacturing overhead per labor hour                   -                                   $3.90

Overhead rate based on:                                                         Machine hour              Labor hour

1. What is the predetermined overhead rate for the Assembly department?

2. What is the predetermined overhead rate for the Customizing department?

3. If a Job 354 uses 72.2 machine hours and 100 labor hours, how much manufacturing overhead would be added to the costs included in Job 354?

Answer 1

Requirement 1
Assembly Department
(A)	Total Fixed Overheads		$ 100,700.00
(B)	Total machine Hours		19000
(A/B)	Predetermined Overhead rate		$    5.30

Predetermined overhead rate for the Assembly department = $5.30 per Machine Hour

Requirement 2
Customizing
(A)	Total Fixed Overheads		$    63,000.00
(B)	Total Labor Hours		6000
(A/B)	Predetermined Overhead rate		$ 10.50

Predetermined overhead rate for the Customizing department= $10.50

Requirement 3
Manufacturing overheads for Job 354

Overheads of Assembly Department
Fixed Overheads Applied
(A)	Machine Hours	72.2
(B)	Predetermined Overhead rate	$               5.30
C= (AxB)	Fixed Overheads Applied	$          382.66
(D)	Machine Hours	72.2
(E)	Rate per Machine Hour	$               2.00
F=(DxE)	Variable manufacturing Overheads	$         144.40
(C+F)	Total manufacturing Overheads for Assembly Department	$          527.06

Overheads of Customizing Department
Fixed Overheads Applied
(A)	Labor Hours	100
(B)	Predetermined Overhead rate	$            10.50
C= (AxB)	Fixed Overheads Applied	$      1,050.00
(D)	Labor Hours	100
(E)	Rate per Labor Hour	$               3.90
F=(DxE)	Variable manufacturing Overheads	$          390.00
(C+F)	Total manufacturing Overheads for Customizing Department	$      1,440.00

Total manufacturing Overheads for Assembly Department	$          527.06
Total manufacturing Overheads for Customizing Department	$      1,440.00
Total manufacturing Overheads	$      1,967.06

Manufacturing overhead that would be added to the costs included in Job 354 is $1967.06