Question

1. Bulla Corporation has two production departments, Machining and Customizing. The company uses a job-order costing system and computes a predetermined overhead rate in each production department. The Machining 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:

	Machining		Customizing
Machine-hours		12,000			19,000
Direct labor-hours		2000			5000
Total fixed manufacturing overhead cost	$	50,400		$	83,600
Variable manufacturing overhead per machine-hour	$	3.00
Variable manufacturing overhead per direct labor-hour				$	6.00

During the current month the company started and finished Job K369. The following data were recorded for this job:

Job K369:	Machining		Customizing
Machine-hours	50		40
Direct labor-hours	40		50

Required:

Calculate the following:
Predetermined OH rate for Machining (round to 2 decimal places)	$
Predetermined OH rate for Customizing (round to 2 decimal places)	$
Total Amount of OH applied to job K369 through both departments (do not include commas)	$

Answer 1

	Overhead Rate for Machining
	Total Fixed Manufacturing overhead cost					$50,400
	Variable Manufacturing overhead cost (3*12000)					36000
	Total Manufacturing overhead cost					$86,400
	Machine Hours					12000
	Overhead Rate = (86400/12000)					$7.20
	Overhead Rate for Customizing
	Total Fixed Manufacturing overhead cost					$83,600
	Variable Manufacturing overhead cost (6*5000)					30000
	Total Manufacturing overhead cost					$113,600
	Machine Hours					5000
	Overhead Rate = (113600/5000)					$22.72
	Total Amount of overhead applied to Job K369
	Machine Hours = 50*7.20				$360.00
	Customizing = 50*22.72				$1,136.00
	Total Overhead cost applied				$1,496.00