Question

Sweeten Company had no jobs in progress at the beginning of March and no beginning inventories. The company has two manufacturing departments—Molding and Fabrication. It started, completed, and sold only two jobs during March—Job P and Job Q. The following additional information is available for the company as a whole and for Jobs P and Q (all data and questions relate to the month of March):

	Molding			Fabrication			Total
Estimated total machine-hours used		2,500			1,500			4,000
Estimated total fixed manufacturing overhead	$	14,750		$	17,850		$	32,600
Estimated variable manufacturing overhead per machine-hour	$	3.30		$	4.10

	Job P			Job Q
Direct materials	$	32,000		$	17,500
Direct labor cost	$	36,200		$	15,100
Actual machine-hours used:
Molding		3,600			2,700
Fabrication		2,500			2,800
Total		6,100			5,500

Sweeten Company had no underapplied or overapplied manufacturing overhead costs during the month.

Required:

For questions 1-8, assume that Sweeten Company uses a plantwide predetermined overhead rate with machine-hours as the allocation base. For questions 9-15, assume that the company uses departmental predetermined overhead rates with machine-hours as the allocation base in both departments.

1. What was the company’s plantwide predetermined overhead rate?

Answer 1

(1)-The company’s plantwide predetermined overhead rate

Estimated total fixed manufacturing overhead cost = $32,600

Estimated total variable manufacturing overhead cost = [2,500 MH x $3.30] + [1,500 MH x $4.10]

= $8,250 + $6,150

= $14,400

Total estimated manufacturing overhead = Estimated total fixed manufacturing overhead cost + Estimated total variable manufacturing overhead cost

= $32,600 + $14,400

= $47,000

Therefore, the Predetermined Overhead rate = Total estimated manufacturing overhead / Total estimated machine hours

= $47,000 / 4,000 Machine hours

= $11.75 per Machine hour

“Hence, the Predetermined Overhead rate will be $11.75”