Question

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 20,600 16,600
Direct labor-hours 7,100 8,300
Total fixed manufacturing overhead cost $140,080 $83,000
Variable manufacturing overhead per machine-hour $2.40
Variable manufacturing overhead per direct labor-hour $4.80

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 30 Direct labor-hours 9 60 The amount of overhead applied in the Customizing Department to Job T138 is closest to:_________

Answer 1

Answer:

Allocated MOH= $888

Explanation:

Giving the following information:

The Customizing Department’s predetermined overhead rate is based on direct labor-hours.

Customizing

Direct labor-hours 8,300

Total fixed manufacturing overhead cost $83,000

Variable manufacturing overhead per direct labor-hour $4.80

Job T138:

Direct labor-hours 60

First, we need to calculate the predetermined overhead rate:

Predetermined manufacturing overhead rate= total estimated overhead costs for the period/ total amount of allocation base

Predetermined manufacturing overhead rate= (83,000/8,300) + 4.8

Predetermined manufacturing overhead rate= $14.8 per direct labor hour

Now, we can allocate overhead to Job 138:

Allocated MOH= Estimated manufacturing overhead rate* Actual amount of allocation base

Allocated MOH= 14.8*60= $888