Question

# Assume a company has two manufacturing departments – Assembly and Fabrication. The company considers all of...

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.

 Budgeted Data Assembly Fabrication Manufacturing overhead costs \$ 300,000 \$ 400,000 Direct labor hours 25,000 15,000 Machine hours 10,000 50,000
 Actual Data Assembly Fabrication Manufacturing overhead costs \$ 330,000 \$ 380,000 Direct labor hours 27,000 16,000 Machine hours 10,500 48,000
 Job Z Assembly Fabrication Direct labor hours 10.50 hours 2 hours Machine hours 1 hour 7.50 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 Particulars Amount Assembly (10.5 hours x \$ 12) \$ 126.00 Fabrication (7.5 hours x \$ 8) \$   60.00 \$ 186.00

.

Workings:

 Computation of Departmental predetermined OH rates Particulars Assembly Fabrication Manufacturing overhead costs \$ 3,00,000.00 \$ 4,00,000.00 Direct labor hours 25000 Machine hours 50000 OH rates \$            12.00 \$              8.00

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