High Desert Potteryworks makes a variety of pottery products

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: Department Direct labor-hours Machine-hours Fixed manufacturing overhead cost Variable manufacturing overhead per machine-houir Variable manufacturing overhead per direct labor-hour Molding Painting 30,000 59,400 90,000 31,000 $216,000 $510,840 $3.00 -$5.00 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 Direct labor-hours Machine-hours Direct materials Direct labor cost 127 73 s 942 $1,220 $ 690 $ 960 330 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 27 units, what would be the unit product cost?

Solution

1) Compute predetermine overhead rate :

Molding department = (216000/90000)+3 = 5.40 per machine hour

Painting department = (510840/59400)+5 = 13.6 per labour hour

2) Total overhead cost applied to job 205 = (330*5.4+127*13.6) = $3509.20

3) Total manufacturing cost recorded for job 205 = 942+1220+690+960+3509.20 = $7321.20

4) Unit cost = 7321.20/27 = $271.16