Assume a company has two manufacturing departments – Assembly
and Fabrication. The company considers all of its manufacturing
overhead costs to be fixed costs. The first set of data below is
budgeted data for the company as a whole that was estimated at the
beginning of the year. The second set of data below is actual data
for the company as a whole that was derived at the end of the year.
The third set of data relates to one particular job completed
during the year– Job Z.
|Manufacturing overhead costs||$||300,000||$||400,000|
|Direct labor hours||25,000||15,000|
|Manufacturing overhead costs||$||330,000||$||380,000|
|Direct labor hours||27,000||16,000|
|Direct labor hours||10.50||hours||2||hours|
Assume the company uses departmental predetermined overhead rates. It uses direct labor-hours as the allocation base in Assembly and machine-hours as the allocation base in Fabrication. How much manufacturing overhead would be applied from both departments to Job Z?
|Allocation of Manufacturing OH to Job Z|
|Assembly||(10.5 hours x $ 12)||$ 126.00|
|Fabrication||(7.5 hours x $ 8)||$ 60.00|
|Computation of Departmental predetermined OH rates|
|Manufacturing overhead costs||$ 3,00,000.00||$ 4,00,000.00|
|Direct labor hours||25000|
|OH rates||$ 12.00||$ 8.00|
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