Juarez Inc uses a joborder costing system for its products w

Juarez, Inc. uses a job-order costing system for its products, which pass from the Machining Department, to the Assembly Department, to finished-goods inventory. The Machining Department is heavily automated; in contrast, the Assembly Department performs a number of manual-assembly activities. The company applies manufacturing overhead using machine hours in the Machining Department and direct-labor cost in the Assembly Department. The following information relates to the year just ended:

Machining Department

Assembly Department

  Budgeted manufacturing overhead

$4,000,000

$3,024,000

  Actual manufacturing overhead

4,280,000

3,040,000

  Budgeted direct-labor cost (based on practical capacity)

1,500,000

5,600,000

  Actual direct-labor cost

1,450,000

5,780,000

  Budgeted machine hours (based on practical capacity)

400,000

100,000

  Actual machine hours

425,000

110,000

The data that follow pertain to job no. DC66, the only job in production at year-end.

Machining Department

Assembly Department

  Direct material

$23,500

$ 6,800

  Direct labor

$27,800

$58,600

  Machine hours

360

150

Required:

1. How much overhead would have been charged to the company’s Work-in-Process account during the year?

Selling and administrative expense amounted to $2,500,000.

Solution

Machining department predetermine overhead rate :

Predetermine overhead rate = 4000000/400000 = 10 per machine hour

Assembly department predetermine overhead rate :

Predetermine overhead rate = 3024000/5600000 = 0.54 per direct labour cost

overhead would have been charged to the company’s Work-in-Process account during the year: