Question

Apple Valley Corporation uses a job cost system and has two production departments, A and B. Budgeted manufacturing costs for the year are:
Department A Department B

Direct materials $700,000 $100,000

Direct manufacturing labor $200,000 $800,000

Manufacturing overhead $600,000 $400,000

The actual material and labor costs charged to Job #432 were as follows:

Total

Direct materials: $25,000

Direct labor:

Department A $ 8,000

Department B $12,000

$20,000

Apple Valley applies manufacturing overhead costs to jobs on the basis of direct manufacturing labor cost using departmental rates determined at the beginning of the year.

For Department A, the manufacturing overhead allocation rate is:

For Department B, the manufacturing overhead allocation rate is:

Manufacturing overhead costs allocated to Job #432 total:

Answer 1

Answer:

For Department A, the manufacturing overhead allocation rate is : 300%

For Department B, the manufacturing overhead allocation rate is : 50%

Manufacturing overhead costs allocated to Job #432 : $30,000.

Explanation:

Apple Valley Corporation uses job cost system and it allocates overhead cost to job on basis of manufacturing labor cost.

1. To identify the manufacturing overhead allocation rate for department A:

(Manufacturing Overhead department A / Direct Manufacturing Labor Department A) * 100

= ($600,000 / $200,000) * 100

= 300%  

2. To identify the manufacturing overhead allocation rate for department B:

(Manufacturing Overhead department B / Direct Manufacturing Labor department B) * 100

= ($400,000 / $800,000) * 100

= 50%

3. To calculate the manufacturing overhead costs allocated to Job #432:

[(Department A direct labor * Manufacturing Overhead department A) / Direct Manufacturing Labor of department A ] + [(Department B direct labor * Manufacturing Overhead department B) / Direct Manufacturing Labor of department B ]

= [( $8,000 * $600,000) / $200,000] + [( $12,000 * $400,000) / $800,000]

= $30,000.