Question

Mahon Corporation has two production departments, Casting and Customizing. The company uses a job-order costing system and computes a predetermined overhead rate in each production department. The Casting Department’s predetermined overhead rate is based on machine-hours and the Customizing Department’s predetermined overhead rate is based on direct labor-hours. At the beginning of the current year, the company had made the following estimates:

	Casting		Customizing
Machine-hours		14,000		12,000
Direct labor-hours		5,000		6,000
Total fixed manufacturing overhead cost	$	112,000	$	48,000
Variable manufacturing overhead per machine-hour	$	2.80
Variable manufacturing overhead per direct labor-hour			$	5.60

During the current month the company started and finished Job T138. The following data were recorded for this job:

Job T138:	Casting		Customizing
Machine-hours	70		50
Direct labor-hours	10		100

The amount of overhead applied in the Customizing Department to Job T138 is closest to: (Round your intermediate calculations to 2 decimal places.)

Multiple Choice

• $1,360.00

• $480.00

• $960.00

• $81,600.00

Answer 1

The amount of overhead applied in the customized department to job T 138 is 1360.00 dollars.

Which is explained below in detail: