Question

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 D Department E Department KManufacturing overhead $990,000 $1,750,000 $1,080,000Direct labor costs $1,237,500 $1,875,000 $675,000Direct labor hours 150,000 125,000 60,000Machine hours 600,000 750,000 120,000During January, the job cost sheets showed the following costs and production data. Department D Department E Department KDirect materials used $210,000 $189,000 $117,000Direct labor costs $180,000 $65,000 $56,250Manufacturing overhead incurred $148,500 $168,000 $118,500Direct labor hours 12,000 16,500 5,250Machine hours 51,000 67,500 10,410a. Compute the predetermined overhead rate for each department. (Round answers to 2 decimal places, e.g. 10.25.)b. Compute the total manufacturing costs assigned to jobs in January in each department. (Round answers to 0 decimal places, e.g. 2,500).c. Compute the under- or overapplied overhead for each department at January 31. (Round answers to 0 decimal places, e.g. 2,525.)

Answer 1

Answer:

a. Compute the predetermined overhead rate for each department. (Round answers to 2 decimal places, e.g. 10.25.)

Predetermined Over head rate=Estimated Manufacturing Cost/ Estimated Hours  (machine hours for K Deptt)

    Predetermined Over head rate     Department D   = 990,000 + 1237500/150,000 =  2227,500/ 150,00=  14.85

Predetermined Over head rate Department E= 1750,000+ 1875,000/125,000 = 3625/125,000= 29

Predetermined Over head rate Department K = 1080,000 + 675,000/120,000=  14.625= 14.63

b. Compute the total manufacturing costs assigned to jobs in January in each department. (Round answers to 0 decimal places, e.g. 2,500).

Department D  Total Manufacturing Costs assigned= 14.85 * 12,000=

$ 178200

Department E Total Manufacturing Costs assigned= 29* 16,500= $478,500

Department K Total Manufacturing Costs assigned= 14.63 *10,410=  

$ 152, 298.3 = $ 152,298

Total Manufacturing Costs incurred = Direct Material + Direct Labor+ Manufacturing Overheads

Department D   = $ 210,000 + $140,000 + $148,500= $ 498,500    

Department E= $189,000+ $65,000 + $ 168,000= $ 422,000

Department K     = $117,000+ $56250 +$ 118,500= $191,750

c. Compute the under- or overapplied overhead for each department at January 31. (Round answers to 0 decimal places, e.g. 2,525.)

Department D   = Actual - Assigned= $ 498,500 - $ 178200=  $ 320,300   unfavorable

Department E=  $ 422,000 - $478,500= $ 56,500  favorable

Department K   = $191,750 - $ 152,298= $ 39,452  unfavorable