Question

High Desert Pottery works makes a variety of pottery products that it sells to retailers. The company uses a job-order costing system in which departmental predetermined overhead rates are used to apply manufacturing overhead cost to jobs. The predetermined overhead rate in the Molding Department is based on machine-hours, and the rate in the Painting Department is based on direct labor- hours. At the beginning Of the year, the company provided the following estimates:
Direct labor-hours 36,500 50,100
Machine-hours 87,000 32,000
Fixed manufacturing overhead cost $174,000 $445,890
Variable manufacturing overhead per machine-hour $3.20 -
Variable manufacturing overhead per direct labor-hour - $5.20

Job 205 was started on August 1 and completed on August 10. The company's cost records show the following information concerning the job:

Department
Molding Painting
Direct labor-hours 76 132
Machine-hours 350 66
Direct materials $938 $1,220
Direct labor cost $720 $1,020

Required:
a. Compute the predetermined overhead rates used in the Molding Department and the Painting Department.
b. Compute the total overhead cost applied to Job 205.
c. What would be the total manufacturing cost recorded for Job 205?
d. If the job contained 22 units, what would be the unit product cost?

Answer 1

Answer:

Results are below.

Explanation:

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

Molding:

Predetermined manufacturing overhead rate= (174,000/87,000) + 3.2

Predetermined manufacturing overhead rate= $5.2 per machine hour

Painting:

Predetermined manufacturing overhead rate= 445,890/50,100 + 5.2

Predetermined manufacturing overhead rate= $14.1

Now, we can allocate overhead to Job 205:

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

Allocated MOH= 5.2*350 + 14.1*132

Allocated MOH= $3,681.2

Finally, the unitary cost of Job 205:

Total cost= (938 + 1,220) + (720 + 1,020) + 3,681.2

Total cost= $7,579

Unitary cost= 7,579/22

Unitary cost= $344.51