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:
|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:
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:
|No of machine hours||80||30|
|No of labour hours||30||
|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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