Problem 164A Part Level Submission Agassi Company uses a job

Problem 16-4A (Part Level Submission) Agassi Company uses a job order cost system in each of its three manufacturing departments. Manufacturing overhead is applied to jobs on the basis of direct labor cost in Department D, direct labor hours in Department E, and machine hours in Department K In establishing the predetermined overhead rates for 2017, the following estimates were made for the year Department Manufacturing ove Direct labor costs Direct labor hours rhead $1,200,000 1,500,000 $900,000 s1,500,000 $1,250,000 450,000 40,000 120,000 100,000 400,000 125,000 500,000 achine hours During January, the job cost sheets showed the following costs and production data Department Direct materials used Direct labor costs Manufacturing overhead incurred Direct labor hours Machine hours $140,000 126,000 78,000 $120,000 110,000 37,500 $99,000 124,000 79,000 3,500 10,400 8,000 34,000 11,000 45,000

Solution

Manufacturing overhead is applied in three departments on the different basis.So, overhead rate in each department will be calculated using different basis. Overhead rate Department D 80% Department E $    12.00 per direct labor hour Department K $       7.50 per machine hour Working: Overhead Costs Basis of overhead assignment Quantity of basis of overhead assignment Overhead rate a b a/b Department D $       12,00,000 Direct Labor cost $        15,00,000 80% Department E $       15,00,000 Direct Labor hours               1,25,000 direct labor hours $    12.00 per direct labor hour Department K $          9,00,000 Machine hours               1,20,000 machine hours $       7.50 per machine hour