Question

Hultquist Corporation has two manufacturing departments--Forming and Customizing. The company used the following data at the beginning of the period to calculate predetermined overhead rates:

		Forming	Customizing	Total
	Estimated total machine-hours (MHs)	9,000	1,000	10,000
	Estimated total fixed manufacturing overhead cost	$50,400	$2,600	$53,000
	Estimated variable manufacturing overhead cost per MH	$1.70	$2.10

During the period, the company started and completed two jobs--Job C and Job L. Data concerning those two jobs follow:

		Job C	Job L
	Direct materials	$15,100	$6,900
	Direct labor cost	$20,800	$8,500
	Forming machine-hours	6,100	2,900
	Customizing machine-hours	400	600

Required:

a. Assume that the company uses a plantwidepredetermined manufacturing overhead rate based on machine-hours. Calculate that overhead rate.

b. Assume that the company uses a plantwidepredetermined manufacturing overhead rate based on machine-hours. Calculate the amount of manufacturing overhead applied to Job L.

c. Assume that the company uses a plantwidepredetermined manufacturing overhead rate based on machine-hours. Calculate the total manufacturing cost assigned to Job L.

d. Assume that the company uses a plantwidepredetermined manufacturing overhead rate based on machine-hours and uses a markup of 80% on manufacturing cost to establish selling prices. Calculate the selling price for Job L.

e. Assume that the company uses departmentalpredetermined overhead rates with machine-hours as the allocation base in both departments. What is the departmentalpredetermined overhead rate in the Forming department?

f. Assume that the company uses departmentalpredetermined overhead rates with machine-hours as the allocation base in both production departments. What is the departmentalpredetermined overhead rate in the Customizing department?

g. Assume that the company uses departmentalpredetermined overhead rates with machine-hours as the allocation base in both production departments. How much manufacturing overhead will be applied to Job L?

h. Assume that the company uses departmentalpredetermined overhead rates with machine-hours as the allocation base in both production departments. Further assume that the company uses a markup of 80% on manufacturing cost to establish selling prices. Calculate the selling price for Job L.

Answer 1

a. Overhead rate = $53000/10000 = $5.30 per hour

b. Overhead applied to Job L = 3500 x $5.30 = $18550

c. Total Manufacturing cost assigned to Job L = $6900+8500+18550 = $33950

d. Selling Price for Job L = $33950 x 1.8 = $61110

e. Departmental overhead rate for Forming department = $50400/9000 = $5.60 per hour

f. Departmental overhead rate for Customizing department = $2600/1000 = $2.60 per hour

g. Overhead applied to Job L = 2900 x 5.6 + 600 x 2.6 = $17800

h. Selling price = ($6900+8500+17800) x 1.8 = $59760