Question

The Conrad Company uses a normal job-costing system at its New Brunswick plant. Its job-costing system has two direct-cost categories (direct materials and direct manufacturing labor) and one manufacturing overhead cost pool (the machining department overhead, allocated to jobs based on machine-hours). The 2020 budget and actual numbers for the plant are as follows:
Machining Department Assembly Department
Manufacturing overhead $1,800,000 $3,600,000
Direct manufacturing labor costs $1,400,000 $2,000,000
Direct manufacturing labor-hours 100,000 200,000
Machine-hours 50,000 200,000

Required:

1. Compute the predetermined overhead rate for each department.
2. During February, the job-cost record for Job 494 contained the following:

Machining Department Assembly Department
Direct materials used $45,000 $70,000
Direct manufacturing labor costs $14,000 $15,000
Direct manufacturing labor-hours 1,000 1,500
Machine-hours 2,000 1,000

Compute the total manufacturing overhead costs allocated to Job 494.

3. At the end of 2014, the actual manufacturing overhead costs were $2,100,000 in machining and $3,700,000 in assembly. Assume that 55,000 actual machine-hours were used in machining and that actual direct manufacturing labor costs in assembly were $2,200,000. Compute the over- or underapplied manufacturing overhead for each department.

Answer 1

Answer:

Instructions are below.

Explanation:

Giving the following information:

Direct labor hours rate= 2,000,000/200,000= $10

First, we need to calculate the predetermined overhead rate for each department:

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

Machining= 1,800,000/50,000= $36 per machine-hour

Assembly= 3,600,000/200,000= $18 per direct labor hour

Job 494:

Direct manufacturing labor costs $14,000 $15,000

Direct manufacturing labor-hours 1,000 1,500

Machine-hours 2,000 1,000

Now, we can allocate overhead to Job 494:

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

Machinning= 36*2,000= $72,000

Assembly= 18*1,500= $27,000

Finally, the under/over allocation:

Number of direct labor hours= 2,200,000/10= 220,000

Allocated overhead:

Machining allocated overhead= 36*55,000= 1,980,000

Assembly allocated overhead= 18*220,000= $3,960,000

Actual manufacturing overhead:

Machining= $2,100,000

Assembly= $3,700,000

Under/over applied overhead= real overhead - allocated overhead

Machining= 2,100,000  1,980,000= $120,000 underallocated

Assembly= 3,700,000 - 3,960,000= $260,000 overallocated