Rocher Corporation has two production departments, Casting and Finishing. The company uses a job-order costing system and computes a predetermined overhead rate in each production department. The Casting 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:??CastingFinishing?Machine-hours17,00013,000?Direct labor-hours4,0006,000?Total fixed manufacturing overhead cost$124,100$52,200?Variable manufacturing overhead per machine-hour$2.30??Variable manufacturing overhead per direct labor-hour?$4.00During the current month the company started and finished Job A394. The following data were

Question

recorded for this job:?Job A394:CastingFinishing?Machine-hours8020?Direct labor-hours1040Required:a. Calculate the estimated total manufacturing overhead for the Casting Department.b. Calculate the predetermined overhead rate for the Casting Department.c. Calculate the amount of overhead applied in the Casting Department to Job A394.

What will be an ideal response?

Answer 1

a. Casting Department overhead cost = Fixed manufacturing overhead cost + (Variable overhead cost per machine-hour × Total machine-hours in the department)
= $124,100 + ($2.30 per machine-hour × 17,000 machine-hours)
= $124,100 +$39,100 = $163,200

b. Casting Department:
Predetermined overhead rate = Estimated total manufacturing overhead cost ÷ Estimated total amount of the = $163,200 ÷ 17,000 machine-hours = $9.60 per machine-hour

c. Casting Department:
Overhead applied to a particular job = Predetermined overhead rate × Amount of the allocation base incurred by the job = $9.60 per machine-hour × 80 machine-hours = $768