Question

Cullumber Company uses a job order cost system in each of its three manufacturing departments. Manufacturing overhead is applied to jobs on the basis of direct labor cost in Department D, direct labor hours in Department E, and machine hours in Department K.

In establishing the predetermined overhead rates for 2020, the following estimates were made for the year.

		Department
		D		E		K
Manufacturing overhead		$1,197,000		$1,500,000		$720,000
Direct labor costs		$1,496,250		$1,250,000		$450,000
Direct labor hours		100,000		125,000		40,000
Machine hours		400,000		500,000		120,000

During January, the job cost sheets showed the following costs and production data.

		Department
		D		E		K
Direct materials used		$140,000		$126,000		$78,000
Direct labor costs		$120,000		$110,000		$37,500
Manufacturing overhead incurred		$99,000		$124,000		$79,000
Direct labor hours		8,000		11,000		3,500
Machine hours		34,000		45,000		10,450

a

Compute the predetermined overhead rate for each department. (Round answers to 2 decimal places, e.g. 12.50 or 12.50%.)
b.

Compute the total manufacturing costs assigned to jobs in January in each department.
c.

Compute the under- or overapplied overhead for each department at January 31. (Enter all amounts as positive numbers and select appropriate option from the list.)

Answer 1

a
Department D	80%		=1197000/1496250
Department E	12	per Direct labor hour	=1500000/125000
Department K	6	per Machine hour	=720000/120000
b
Manufacturing costs:
Department D	356000		=140000+120000+(120000*80%)
Department E	368000		=126000+110000+(11000*12)
Department K	178200		=78000+37500+(10450*6)
c
Manufacturing overhead:
Department D	3000	Underapplied	=99000-(120000*80%)
Department E	8000	Overapplied	=(11000*12)-124000
Department K	16300	Underapplied	=79000-(10450*6)