Question

Tomey Corporation has two production departments, Forming and Finishing. The company uses a job-order costing system and computes a predetermined overhead rate in each production department. The Forming Department’s predetermined overhead rate is based on machine-hours and the Finishing 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: Forming Finishing Machine-hours 18,000 14,000 Direct labor-hours 2,000 8,000 Total fixed manufacturing overhead cost $ 99,000 $ 70,400 Variable manufacturing overhead per machine-hour $ 2.10 Variable manufacturing overhead per direct labor-hour $ 3.70 During the current month the company started and finished Job T617. The following data were recorded for this job: Job T617: Forming Finishing Machine-hours 90 20 Direct labor-hours 30 60 Direct materials $ 940 $ 350 Direct labor cost $ 960 $ 1,920 The total job cost for Job T617 is closest to: (Round your intermediate calculations to 2 decimal places.)
a. $5,604
b. $2,584
c. $684
d. $3,020

Answer 1

Answer:

a. $5,604

Explanation:

Forming Department overhead cost = Fixed manufacturing overhead cost + (Variable overhead cost per machine-hour × Total machine-hours in the department)

= $99,000 + ($2.10 per machine-hour × 18,000 machine-hours)

= $99,000 +$37,800 = $136,800

Predetermined overhead rate = Estimated total manufacturing overhead cost ÷ Estimated total amount of the allocation base incurred

= $136,800 ÷ 18,000 machine-hours

= $7.60 per machine-hour

Overhead applied to a particular job = Predetermined overhead rate × Amount of the allocation base incurred by the job

= $7.60 per machine-hour × 90 machine-hours

= $684

Finishing Department overhead cost = Fixed manufacturing overhead cost + (Variable overhead cost per direct labor-hour × Total direct labor-hours in the department)

= $70,400 + ($3.70 per direct labor-hour × 8,000 direct labor-hours)

= $70,400 + $29,600 = $100,000

Predetermined overhead rate = Estimated total manufacturing overhead cost ÷ Estimated total amount of the allocation base incurred

= $100,000 ÷8,000 direct labor-hours = $12.50 per direct labor-hour

Overhead applied to a particular job = Predetermined overhead rate × Amount of the allocation base incurred by the job

= $12.50 per direct labor-hour × 60 direct labor-hours

= $750

                                              Forming      Finishing       Total

Direct materials........................$940           $350           $1,290

Direct labor...............................$960           $1,920         $2,880

Manufacturing overhead.......$684           $750            $1,434

Total cost of Job T617........................................................$5,604