Question

# Mahon Corporation has two production departments, Casting and Customizing. The company uses a job-order costing system...

Mahon Corporation has two production departments, Casting and Customizing. The company uses a job-order costing system and computes a predetermined overhead rate in each production department. The Casting Department’s predetermined overhead rate is based on machine-hours and the Customizing Department’s predetermined overhead rate is based on direct labor-hours. At the beginning of the current year, the company had made the following estimates:

 Casting Customizing Machine-hours 19,400 15,400 Direct labor-hours 6,500 7,700 Total fixed manufacturing overhead cost \$ 120,280 \$ 81,620 Variable manufacturing overhead per machine-hour \$ 1.80 Variable manufacturing overhead per direct labor-hour \$ 3.50

During the current month the company started and finished Job T138. The following data were recorded for this job:

 Job T138: Casting Customizing Machine-hours 80 60 Direct labor-hours 15 80

The amount of overhead applied in the Customizing Department to Job T138 is closest to: (Round your intermediate calculations to 2 decimal places.)

a. \$1,056.00

b. \$108,570.00

c. \$1,128.00

d. \$528.00

The amount of overhead is computed as shown below:

Overhead rate of customizing department is computed as follows:

= Total fixed manufacturing overhead cost / Direct labor hours

= \$ 81,620 / 7,700

= \$ 10.6

Variable manufacturing overhead is computed as follows:

= Variable manufacturing overhead per direct labor-hour x Direct labor-hours

= \$ 3.50 x 80

= \$ 280

Fixed overhead manufacturing overhead is computed as follows:

= Overhead rate of customizing department x Direct labor-hours

= \$ 10.6 x 80

= \$ 848

So, the total amount of overhead is computed as follows:

= \$ 280 + \$ 848

= \$ 1,128.00

So, the correct answer is option c.

Feel free to ask in case of any query relating to this question

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