Question

Tinkle-Tinkle Glass Company makes glass globe paper weights for desks. The company uses a job-order cost system and predetermined overhead rates to apply manufacturing overhead cost to jobs. The predetermined overhead rate in the Fabrication Department is based on machine hours, and the rate in the Finishing Department is based on direct labor hours. At the beginning of the year, the company’s management made the following estimates for the year:

                                                                                                            Department

                                                                                                Fabrication       Finishing

Machine hours                                                                         83,000            28,000

Direct labor hours                                                                     30,000            43,000

Direct material cost                                                                 $412,000            $213,000

Direct labor cost                                                                      $299,000            $692,000

Fixed manufacturing overhead cost                                            $799,000           $279,000

Variable manufacturing overhead per machine hour                       $2.05                    --

Variable manufacturing overhead per direct labor hour                       --                  $2.00

Job 25 (the Christmas holiday special) was started on August 1 and completed on August 31. The company’s cost records show the following information concerning the job:

                                                                                                            Department     

                                                                                                Fabrication       Finishing

Machine hours                                                                                  315                   80

Direct labor hours                                                                              105                125

Direct materials cost                                                                      $1,305          $1,030

Direct labor cost                                                                                $880              1,085

At the end of the year, the records of Tinkle-Tinkle Glass revealed the following actual cost and

operating data for all jobs during the year:

                                                                                                            Department

                                                                                                Fabrication       Finishing

Machines hours                                                                           87,000               31,000

Direct labor hours                                                                        32,000               30,000

Direct materials cost                                                                 $424,000           $160,000

Manufacturing overhead cost                                                    $712,000           $287,000         

What was the amount of actual overhead in each department at the end of the year? Was it underapplied or overapplied? (You should have a total of four answers for this question.)

Answer 1

What was the amount of actual overhead in each department at the end of the year?

	Fabrication	Finishing
Actual overhead	712,000.00	287000
Applied Overhead	1,015,856.02	365000
overapplied Overhead	303,856.02	78000
	overapplied	overapplied

Workings

Fabrication Department	Overhead Rate	Machine Hour Actual	Total
Variable manufacturing	2.05	87000	178,350.00
Fixed manufacturing overhead cost 799000/83000	9.63	87000	837,506.02
Total Overhead Applied			1015856.024

Finishing	Overhead Rate	Direct labor hours	Total
Variable manufacturing	2	43000	86,000.00
Fixed manufacturing overhead cost 279000/43000	6.49	43000	279,000.00
Total Overhead Applied			365000