Question

# Bulla Corporation has two production departments, Machining and Customizing. The company uses a job-order costing system...

Bulla 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 25,000 17,000 Direct labor-hours 1,000 5,000 Total fixed manufacturing overhead cost \$ 107,500 \$ 69,700 Variable manufacturing overhead per machine-hour \$ 3.00 Variable manufacturing overhead per direct labor-hour \$ 6.00

During the current month the company started and finished Job K369. The following data were recorded for this job:

 Job K369: Machining Customizing Machine-hours 80 30 Direct labor-hours 30 50

Required:

Calculate the total amount of overhead applied to Job K369 in both departments

Total amount of overhead applied to job 369 in both departments is as follows:

 Particulars Machining Customizing No of machine hours 80 30 No of labour hours 30 50 Variable overheads applied 80x\$3 = \$240 50x\$6 = \$300 Fixed overheads applied \$107500/25000x80=\$344 \$69700/5000x50=\$697 Total Overheads Applied \$240+\$344 = \$584 \$300+\$697 = \$997

Notes: The variable overheads are applied for the job k369 in machining department based on machine hours and in customising department based on labour hours. Fixed overheads are also applied on the same basis.

Conclusion: Total overhead applied to Job K369 in machining department is \$584 and in customising department is \$997.

PS: Please use "Thums Up" if you are contented with my solution and presentation.

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