Question

Mason Company has two manufacturing departments—Machining and Assembly. The company considers all of its manufacturing overhead...

Mason Company has two manufacturing departments—Machining and Assembly. The company considers all of its manufacturing overhead costs to be fixed costs. It provided the following estimates at the beginning of the year as well as the following information with respect to Jobs A and B:

 Estimated Data Machining Assembly Total Manufacturing overhead \$ 500,000 \$ 100,000 \$ 600,000 Direct labor hours 10,000 50,000 60,000 Machine hours 50,000 5,000 55,000
 Job A Machining Assembly Total Direct labor hours 5 10 15 Machine hours 11 2 13
 Job B Machining Assembly Total Direct labor hours 4 5 9 Machine hours 12 3 15

Required:

1. If Mason Company uses a plantwide predetermined overhead rate with direct labor-hours as the allocation base, how much manufacturing overhead cost would be applied to Job A? How about Job B?

2. Assume that Mason Company uses departmental predetermined overhead rates. The Machining Department is allocated based on machine-hours and the Assembly Department is allocated based on direct labor-hours. How much manufacturing overhead cost would be applied to Job A? How about Job B?

 1 Estimated Manufacturing overhead 600000 Divide by Direct labor hours 60000 Plantwide predetermined overhead rate 10 Manufacturing overhead cost applied to Job A 150 =15*10 Manufacturing overhead cost applied to Job B 90 =9*10 2 Machining Assembly Estimated Manufacturing overhead 500000 100000 Divide by Machine hours/Direct labor hours 50000 50000 Predetermined overhead rate 10 2 Manufacturing overhead cost applied to Job A 130 =(11*10)+(10*2) Manufacturing overhead cost applied to Job B 130 =(12*10)+(5*2)