Bulla Corporation has two production departments, Machining and Customizing. The company uses a job-order costing system and computes a predetermined overhead rate in each production department. The Machining Department's predetermined overhead rate is based on machine-hours and the Customizing 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:??MachiningCustomizing?Machine-hours19,00013,000?Direct labor-hours2,0009,000?Total fixed manufacturing overhead cost$98,800$84,600?Variable manufacturing overhead per machine-hour$2.10??Variable manufacturing overhead per direct labor-hour?$3.60During the current month the company started and finished Job K369. The following

Question

data were recorded for this job:?Job K369:MachiningCustomizing?Machine-hours9010?Direct labor-hours2050Required:Calculate the total amount of overhead applied to Job K369 in both departments.

What will be an ideal response?

Answer 1

Machining Department:
Machining Department overhead cost = Fixed manufacturing overhead cost + (Variable overhead cost per machine-hour × Total machine-hours in the department)
= $98,800 + ($2.10 per machine-hour × 19,000 machine-hours)
= $98,800 +$39,900 = $138,700
Predetermined overhead rate = Estimated total manufacturing overhead cost ÷ Estimated total amount of the = $138,700 ÷ 19,000 machine-hours = $7.30 per machine-hour
Overhead applied to a particular job = Predetermined overhead rate × Amount of the allocation base incurred by the job = $7.30 per machine-hour × 90 machine-hours = $657

Customizing Department:
Customizing Department overhead cost = Fixed manufacturing overhead cost + (Variable overhead cost per direct labor-hour × Total direct labor-hours in the department)
= $84,600 + ($3.60 per direct labor-hour × 9,000 direct labor-hours)
= $84,600 + $32,400 = $117,000
Predetermined overhead rate = Estimated total manufacturing overhead cost ÷ Estimated total amount of the = $117,000 ÷ 9,000 direct labor-hours = $13.00 per direct labor-hour
Overhead applied to a particular job = Predetermined overhead rate × Amount of the allocation base incurred by the job = $13.00 per direct labor-hour × 50 direct labor-hours = $650

 Overhead applied to Job K369