Problem 219 Multiple Predetermined Overhead Rates Applying O

Problem 2-19 Multiple Predetermined Overhead Rates; Applying Overhead [LO2-1, LO2-2, LO2-4) High Desert Potteryworks makes a variety of pottery products that it sells to retailers. The company uses a job-order costing system in which departmental predetermined overhead rates are used to apply manufacturing overhead cost to jobs. The predetermined overhead rate in the Molding Department is based on machine-hours, and the rate in the Painting Department is based on direct labor- hours. At the beginning of the year, the company provided the following estimates: artment Direct labor-hours Machine-hours Fixed manufacturing overhead cost Variable manufacturing overhead per nachine-hour Variable manufacturing overhead per direct labor-hour Molding Painting 33,000 56,800 82,00038,000 $188,600 $545,280 $ 2.40 $4.40 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 MoldingPainting 86 350 132 72 Direet labor-hours Machine-hours Direct materials Direct labor cost 934 $1,200 750 990 Required: 1. Compute the predetermined overhead rates used in the Molding Department and the Painting Department. 2. Compute the total overhead cost applied to Job 205. 3-a. What would be the total manufacturing cost recorded for Job 205? 3-b. If the job contained 35 units, what would be the unit product cost?

Solution

Answer = 1: Calculation of the overhead recovery rates Molding Painting Total Total Labour Hours = $                 33,000 $              56,800 $                      89,800 Total Machiene Hours $                 82,000 $              38,000 $                   1,20,000 Recovery Rate of Molding Ovehead = total Manufacturing Overead / Total Machiene Hours Recovery Rate of Molding Ovehead = Total Molding Overhead = $              1,88,600 Divide By \"/\" By Total Machiene Hours = $              1,20,000 Recovery Rate Per Labour Hours of Molding Ovehead = $                      1.57 Recovery Rate of painting Ovehead = total Painting Overead / Total Labour Hours Recovery Rate of Molding Ovehead = Total Molding Overhead = $              5,45,280 Divide By \"/\" By Total Labour Hours = $                 89,800 Recovery Rate Per Labour Hours of Molding Ovehead = $                      6.07 CALCULATION OF THE TOTAL OVERHEAD COST FOR JOB 205 Particulars Molding Painting Total Direct Cost: Direct Materials = $                 934.00 $           1,200.00 $                   2,134.00 Direct LaboR Cost = $                 750.00 $              990.00 $                   1,740.00 Variable Cost : For Machiene Hours : $                 840.00 $                      840.00 ($ 2.40 X 350 Hrs) For Direct Labour Hrs $              580.80 $                      580.80 ($ 4.40 X132 Hrs) Ovehead Cost Variable Overhead on direct labour $                 522.02 $              801.24 $                   1,323.26 (86 L HrsX $ 6.07) (132 L HrsX $ 6.07) Variable Overhead on Machiene Horus $                 549.50 $              113.04 $                      662.54 (350 Hrs X 1.57) (72 Hrs X 1.57) Total Cost $              3,595.52 $           3,685.08 $                   7,280.60 Total Units in Job = 35 Units Per unit Cost = Total Cost / Number of units = $                      208.02 Answer = 2) Total Overhead cost applied to Job = $              1,985.80 (1323.26 + 662.54) Answer = 3) total Cost of the Job = $              7,280.60 Answer =4 ) Unit Product Cost= $                 208.02