Question

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

Answer 1

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.

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