Question

The Silver Corporation uses a departmental predetermined overhead rate to apply manufacturing overhead to jobs. The predetermined overhead rate is based on labor cost in each of three Departments: Fabrication, Machining and Assembly. At the beginning of the year, the Corporation made the following estimates:

Manufacturing Overhead $350,000 Fabrication

$400,000 Machining

$90,000 Assembly

$840,000 Total

Labor Cost $200,000 Fabrication

$100,000 Machining

$300,000 Assembly

$600,000 Total

1.Calculate the plantwide predetermined overhead rate  .

2.Calculate the fabrication predetermined overhead rate  .

3.Calculate the machining predetermined overhead rate

4.Calculate the assembly predetermined overhead rate

Based on these rates, Calculate the total manufacturing cost attributed to job XYZ below.

5. What is the Total cost  .

Direct Materials $3,000 Fabrication

$200 Machining

$1,400 Assembly

$4,600 Total

Direct Labor $2,800 Fabrication

$500 Machining

$6,200 Assembly

$9,500 Total

Solve Parts 1-5

Answer 1

Solution 1:

Plantwide predetermined overhead rate = Estimated overhead / Estimated direct labor cost

= $840,000 / $600,000 = 140% of DL cost

Solution 2 to 4:

Computation of Departmental overhead rate
Department	Estimated overhead	Estimated direct labor cost	Overhead rate
Fabrication	$350,000.00	$200,000.00	175.0%	of DL cost
Machining	$400,000.00	$100,000.00	400.0%	of DL cost
Assembly	$90,000.00	$300,000.00	30.0%	of DL cost

Solution 5:

Computation of manufacturing cost of Job XYZ
Particulars	Fabricartion	Machining	Assembly	Total
Direct materials	$3,000.00	$200.00	$1,400.00	$4,600.00
Direct labor	$2,800.00	$500.00	$6,200.00	$9,500.00
Overhead applied	$4,900.00	$2,000.00	$1,860.00	$8,760.00
Total				$22,860.00