Question

High Desert Potteryworks makes a variety of pottery products that it sells to retailers, such as Home Depot. The company uses a job-order costing system in which predetermined overhead rates are used to apply manufacturing overhead costs to jobs. The predetermined overhead rate in the Moulding Department is based on machine-hours, and the rate in the Painting Department is based on direct labour cost. At the beginning of the year, the company’s management made the following estimates:

	Department
	Moulding			Painting
Direct labour-hours		13,000			62,000
Machine-hours		74,000			8,400
Direct materials cost	$	514,000		$	654,000
Direct labour cost	$	130,000		$	434,000
Manufacturing overhead cost	$	666,000		$	759,500

Job 205 was started on August 1 and completed on August 10. The company’s cost records show the following information concerning the job:

	Department
	Moulding			Painting
Direct labour-hours		30			120
Machine-hours		130			20
Materials placed into production	$	510		$	372
Direct labour cost	$	330		$	720

Required:

1. Compute the predetermined overhead rate used during the year in the Moulding Department. Compute the rate used in the Painting Department. (Round "Cost per machine-hour" answer to 2 decimal places.)

Predetermined Overhead Rate

Moulding Department ______________ per machine- hour

Painting Department _______________ % of direct labour cost

2. Compute the total overhead cost applied to Job 205. (Do not round intermediate calculations. Enter your answer rounded to the nearest whole dollar.)

Total overhead cost_________________

3-a. What would be the total cost recorded for Job 205? (Do not round intermediate calculations. Enter your answers rounded to the nearest whole dollar.)

	Department
	Moulding	Painting	Total
Direct Materials
Direct labour
Manufacturing overhead applied
Total cost

3-b. If the job contained 60 units, what would be the cost per unit? (Do not round intermediate calculations and round your final answer to 2 decimal places.)

Cost per unit. _______________

4. At the end of the year, the records of High Desert Potteryworks revealed the following actual cost and operating data for all jobs worked on during the year:

	Department
	Moulding			Painting
Direct labour-hours		10,400			62,400
Machine-hours		65,400			9,400
Direct materials cost	$	434,000		$	684,000
Direct labour cost	$	112,000		$	440,000
Manufacturing overhead cost	$	600,000		$	728,500

What was the amount of under- or overapplied overhead in each department at the end of the year? (Do not round intermediate calculations.)

Moulding Department		Overhead
Painting Department		Overhead

Answer 1

1) Molding overhead rate = 666000/74000 = 9 per MH

Painting overhead rate = 434000/759500 = 175% of labor cost

2) Total overhead cost assigned = (130*9+720*1.75) = 2430

3) Total Cost

	Molding	Painting	Total
Direct material	510	372	882
Direct labor	330	720	1050
Overhead	1170	1260	2430
Total	2010	2352	4362

3b) Unit Cost = 4362/60 = 72.70

4) Over Under applied overhead

Molding overhead	65400*9 = 588600	600000	11400 Under applied
Painting overhead	440000*1.75 = 770000	728500	41500 Over applied