Question

Tomey Corporation has two production departments, Forming and Finishing. The company uses a job-order costing system and computes a predetermined overhead rate in each production department. The Forming Department’s predetermined overhead rate is based on machine-hours and the Finishing 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: Forming Finishing Machine-hours 18,000 14,000 Direct labor-hours 2,000 8,000 Total fixed manufacturing overhead cost $ 99,000 $ 70,400 Variable manufacturing overhead per machine-hour $ 2.10 Variable manufacturing overhead per direct labor-hour $ 3.70 During the current month the company started and finished Job T617. The following data were recorded for this job: Job T617: Forming Finishing Machine-hours 90 20 Direct labor-hours 30 60 Direct materials $ 940 $ 350 Direct labor cost $ 960 $ 1,920 The total job cost for Job T617 is closest to: (Round your intermediate calculations to 2 decimal places.) Multiple Choice $5,604 $2,584 $684 $3,020

Answer 1

• All working forms part of the answer
• Working:

Working		Forming Department	Finishing Department
A	Fixed Overhead	$            99,000.00	$                  70,400.00
	Allocation base	machine hours	direct labor hours
B	Amount of allocation base	18,000 machine hours	8,000 direct labor hours
C = A/B	Fixed overhead rate	$                       5.50 per machine hour	$                             8.80 per direct labor hour
D	Variable overhead rate	$                       2.10 per machine hour	$                             3.70 per direct labor hour
E = C+D	Total Overhead	$                       7.60 per machine hour	$                           12.50 per direct labor hour
F	No. of machine hours for the Job	90 machine hours	NA
G = E x F	Amount of overhead allocated	$                  684.00	NA
H	No. of direct labor hours for the Job	NA	60 direct labor hours
I = E x H	Amount of overhead allocated	NA	$                        750.00

• Answer calculation

	Forming Department	Finishing Department	Total
Direct Material	$                  940.00	$                        350.00	$            1,290.00
Direct labor	$                  960.00	$                     1,920.00	$            2,880.00
Overhead allocated [calculated above]	$                  684.00	$                        750.00	$            1,434.00
Total Job Cost for Job T617			$            5,604.00

• Hence, correct answer = Option #1: $ 5,604.00