Question

Hill Manufacturing uses departmental cost driver rates to apply manufacturing overhead costs to products. Manufacturing overhead costs are applied on the basis of machine-hours in the Machining Department and on the basis of direct labor-hours in the Assembly Department. At the beginning of 2018, the following estimates were provided for the coming year:
Machining Assembly
Direct labor-hours 10,000 dlh 90,000 dlh
Machine-hours 100,000 mah 5,000 mh
Direct labor cost $ 80,000 $720,000
Manufacturing overhead costs $250,000 $360,000
The accounting records of the company show the following data for Job #846:

Machining Assembly
Direct labor-hours 50 dlh 120 dlh
Machine-hours 170 mh 10 mh
Direct material cost $2,700 $1,600
Direct labor cost $ 400 $ 900

Required:

a. Compute the manufacturing overhead allocation rate for each department.

b .Compute the total cost of Job #846

Answer 1

Answer:

a. Manufacturing overhead allocation rate for each department.

Machining Department

Overhead allocation rate =  $2.50

Assembly Department

Overhead allocation rate = $4.00

b.  total cost of Job #846 is $6,505

Explanation:

a. Manufacturing overhead allocation rate for each department.

Machining Department

Overhead allocation rate = Overhead / Machine hours

                                          = $250,000/ 100,000

                                          = $2.50

Assembly Department

Overhead allocation rate = Overhead / direct labor-hours

                                          = $360,000/ 90,000

                                          = $4.00

b.  total cost of Job #846

Direct material cost :

Machining                               $2,700

Assembly                                 $1,600

Direct labor cost    :

Machining                                $ 400

Assembly                                 $ 900

Overhead Costs   :

Machining ( $2.50 × 170)        $ 425

Assembly ( $4.00 × 120)         $ 480

Total Cost                               $6,505