Question

Cutting		Finishing
Direct labor-hours		8,900		73,000
Machine-hours		50,600		1,700
Total fixed manufacturing overhead cost	$	370,000	$	591,000
Variable manufacturing overhead per machine-hour	$	2.00		—
Variable manufacturing overhead per direct labor-hour		—	$	3.75

Required:

1. Compute the predetermined overhead rate for each department.

2. The job cost sheet for Job 203, which was started and completed during the year, showed the following:

	Department
	Cutting				Finishing
Direct labor-hours			3				19
Machine-hours			84				4
Direct materials		$	800			$	350
Direct labor cost		$	57			$	361

Using the predetermined overhead rates that you computed in requirement (1), compute the total manufacturing cost assigned to Job 203.

3. Would you expect substantially different amounts of overhead cost to be assigned to some jobs if the company used a plantwide predetermined overhead rate based on direct labor-hours, rather than using departmental rates?

Answer 1

Solution:

1) Predtermined overhead rate:

Cutting:

Fixed overhead per machine hour = Total fixed manufacturing overhead cost / Machine Hours

=370,000/50,600

=7.31

Predetermined overhead rate per machine hour = Fixed overhead per machine hour + Variable overhead per machine hour

=7.31+2.00

=9.31

Finishing:

Fixed overhead per direct labour hour = Total fixed manufacturing overhead cost /Direct labor hours

=591,000/73,000

=8.09

Predetermined overhead rate per direct labour hour = Fixed overhead per direct labour hour + Variable overhead per direct labour hour

=8.09+3.75

=$11.84

Cutting	$9.31 Per MH
Finishing	$11.84 Per DLH

2)

Direct materials	$1,150	($800 +$350)
Direct labor cost	$418	($57+$361)
Overhead applied	$1,007	($84*9.31)+(19*11.84)
Total manufacturing cost assigned to Job 203	$2,575

3)

Yes

Please give a Thumbs up ?. Thanks!!