Question

High Desert Potteryworks makes a variety of pottery products that it sells to retailers, such as Home Depot. The company uses a job-order costing system in which predetermined overhead rates are used to apply manufacturing overhead cost to jobs. The predetermined overhead rate in the Moulding Department is based on machine-hours, and the rate in the Painting Department is based on direct labour cost. At the beginning of the year, the company’s management made the following estimates:

	Department
	Moulding			Painting
Direct labour-hours		13,250			62,500
Machine-hours		75,000			8,500
Direct materials cost	$	515,000		$	655,000
Direct labour cost	$	132,500		$	437,500
Manufacturing overhead cost	$	682,500		$	743,750

Job 205 was started on August 1 and completed on August 10. The company’s cost records show the following information concerning the job:

	Department
	Moulding			Painting
Direct labour-hours		35			130
Machine-hours		140			25
Materials placed into production	$	520		$	382
Direct labour cost	$	340		$	730

Required:

1. Compute the predetermined overhead rate used during the year in the Moulding Department. Compute the rate used in the Painting Department. (Round "Cost per machine-hour" answer to 2 decimal places.)

2. Compute the total overhead cost applied to Job 205. (Do not round intermediate calculations. Enter your answer rounded to the nearest whole dollar.)

3-a. What would be the total cost recorded for Job 205? (Do not round intermediate calculations. Enter your answers rounded to the nearest whole dollar.)

3-b. If the job contained 70 units, what would be the cost per unit? (Do not round intermediate calculations and round your final answer to 2 decimal places.)

4. At the end of the year, the records of High Desert Potteryworks revealed the following actual cost and operating data for all jobs worked on during the year:

	Department
	Moulding			Painting
Direct labour-hours		10,500			62,500
Machine-hours		65,500			9,500
Direct materials cost	$	435,000		$	685,000
Direct labour cost	$	113,000		$	441,000
Manufacturing overhead cost	$	607,550		$	734,375

What was the amount of under- or overapplied overhead in each department at the end of the year? (Do not round intermediate calculations.)

Answer 1

1) Overhead rate

Molding overhead rate = 682500/75000 = 9.1 per MH

painting overhead rate = 743750/62500 = 11.90 per DLH

2) Total overhead applied = (140*9.1+130*11.90) = 2821

3a) Total Cost

	Molding	Painting	Total
Direct material	520	382	902
Direct labor	340	730	1070
Overhead	1274	1547	2821
Total Cost	2134	2659	4793

3b) Unit cost = 4793/70 = 68.47

4) Calculate following

	Applied overhead	Actual overhead
Molding overhead	65500*9.1 = 596050	607550	11500 Under applied
Painting overhead	62500*11.9 = 743750	734375	9375 Over applied