Question

The York Co. uses a job order cost system and applies factory overhead to individual jobs by using predetermined overhead rates.

In department X, overhead is applied on the basis of machine hours, and in department Y, on the basis of direct labor hours.

At the beginning of the current year, management made the following budget estimates:

Dept X Dept Y

Direct Labor $210,000 $384,000

Factory Overhead $216,000 $105,000

Machine Hours 36,000 900

Direct Labor Hours 18,000 25,000

Production order No. 401 for 2,000 units was started in the middle of January and completed two weeks later. The cost records for this job show the following:

Job No. 401 Dept X Dept Y

Cost of Direct Materials $6,000 $13,000

Direct Labor Cost $7,000 $15,000

Direct Labor Hours 650 1,000

Machine Hours 1,200 100

Required:

1. Determine the overhead rate that should be used for each department in applying overhead costs to Job No. 401.
2. What is the total cost of Job No. 401, and the unit cost of the product manufactured on this production order?
3. Assume that actual overhead costs for the year were $210,000 in Dept X and $108,500 in Dept Y. Actual machine hours in Dept X were 34,000, and actual direct labor hours in Dept Y were 25,000 during the year.
4. On the basis of that information, determine the over or under applied overhead for each department for the year.

Answer 1