Question

The following information is available pertaining to the Production Division of Clarkson Enterprises: Assembly Dept. Finishing Dept. Total Overhead costs $10,000 $30,000 $40,000 Direct labor hours 8,000 2,000 10,000 Machine hours 3,000 5,000 8,000 Production information pertaining to Job 4X5: Assembly Dept. Finishing Dept. Total Prime costs $2,380 $-0- $2,380 Direct labor hours 280 -0- 280 Machine hours -0- -0- -0- Units produced 500 -0- 500

1. Refer to Figure 5-7. What is the plant wide overhead rate based on direct labor hours?

2. Refer to Figure 5-7. Using the plant wide overhead rate based on direct labor hours what is the cost of Job 4X5?

3. Refer to Figure 5-7. What is the overhead rate for the Finishing Department based on machine hours?

4. Refer to Figure 5-7. What are the total overhead costs assigned to Job 4X5, assuming the Assembly and Finishing Departments use direct labor hours and machine hours for their bases, respectively?

Answer 1

(1) Plantwide O/H rate based on direct labour hrs = Total OH/Total Labour hrs

    = 40000/10000 = $ 4 per labour hr

(2) Cost of Job 4X5 = Prime cost + O/H cost

      = 2380 + (4 * 280) = $ 3500

(3) Finishing Dept O/H rate based on machine hrs = Finishing OH/Total machine hrs in finishing dept

    =30000/5000 = 6

(4) O/H assigned to job 4X5:-

Assembly Dept (10000/8000) * 280	350
Finishing Dept (30000/5000) * 0	0
	350