Question

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?

Answer 1

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)