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		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.)

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