Question

Morataya Corporation has two manufacturing departments--Machining and Assembly. The company used the following data at the beginning of the year to calculate predetermined overhead rates:

	Machining		Assembly		Total
Estimated total machine-hours (MHs)		7,000		3,000		10,000
Estimated total fixed manufacturing overhead cost	$	39,200	$	6,600	$	45,800
Estimated variable manufacturing overhead cost per MH	$	1.90	$	2.10

During the most recent month, the company started and completed two jobs--Job B and Job G. There were no beginning inventories. Data concerning those two jobs follow:

	Job B		Job G
Direct materials	$	14,800	$	8,300
Direct labor cost	$	22,000	$	8,900
Machining machine-hours		4,800		2,200
Assembly machine-hours		1,200		1,800

Assume that the company uses a plantwide predetermined manufacturing overhead rate based on machine-hours. The amount of manufacturing overhead applied to Job B is closest to: (Round your intermediate calculations to 2 decimal places.)

Multiple Choice

• $31,392

• $27,480

• $39,240

• $7,848

Answer 1

Machining:
Estimated fixed mfg overhead	39200
Estimated variable mfg overhead [1.90 x 7000]	13300
Estimated total mfg overhead	52500
Assembly:
Estimated fixed mfg overhead	6600
Estimated variable mfg overhead [2.10 x 3000]	6300
Estimated total mfg overhead	12900

Total mfg overhead = 52500 + 12900 = 65400

Thus, predetermined overhead rate = Total mfg overhead/ total machine hrs

= 65400/ 10000

= $6.54 per machine hr

Overhead rate applied to Job B

= predetermined overhead rate x Machine hrs incurred by Job B

= 6.54 x 6000

= 39240 i.e. Option C