Question

# High Desert Potteryworks makes a variety of pottery products that it sells to retailers, such as...

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 15,500 67,000 Machine-hours 84,000 9,400 Direct materials cost \$ 524,000 \$ 664,000 Direct labour cost \$ 155,000 \$ 469,000 Manufacturing overhead cost \$ 840,000 \$ 820,750

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 25 120 Machine-hours 130 30 Materials placed into production \$ 500 \$ 362 Direct labour cost \$ 320 \$ 710

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 11,400 63,400 Machine-hours 66,400 10,400 Direct materials cost \$ 444,000 \$ 694,000 Direct labour cost \$ 122,000 \$ 450,000 Manufacturing overhead cost \$ 676,400 \$ 787,250

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

#### Homework Answers

Answer #1
 1) Predetermined OH rate Particulars Moulding Painting Manufacturing overhead cost \$ 8,40,000.00 \$ 8,20,750.00 Machine-hours 84000 Direct labour cost \$ 4,69,000.00 Rates \$            10.00 \$              1.75
 2) OH cost applied to Job 205 Moulding (130 x \$ 10) \$      1,300 Painting (\$ 710 x 1.75) \$      1,243 \$      2,543
 3-a) Total cost of Job 205 Direct materials cost \$          862 (\$ 500 + \$ 362) Direct labour cost \$      1,030 (\$ 320 + \$ 710) OH cost applied \$      2,543 \$      4,435
 3-b) Cost per unit (\$ 4435 / 70 units) \$      63.35
 4) Particulars Moulding Painting Machine-hours 66400 Direct labour cost \$ 4,50,000.00 OH rate \$            10.00 \$              1.75 OH applied \$ 6,64,000.00 \$ 7,87,500.00 Manufacturing overhead cost \$ 6,76,400.00 \$ 7,87,250.00 Overapplied / (Underapplied) \$ -12,400.00 \$          250.00
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