Madole Corporation has two production departments, Forming and Customizing. 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 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:??FormingCustomizing?Machine-hours19,00012,000?Direct labor-hours4,0008,000?Total fixed manufacturing overhead cost$119,700$67,200?Variable manufacturing overhead per machine-hour$2.00??Variable manufacturing overhead per direct labor-hour?$4.20During the current month the company started and finished Job K973. The following data

Question

were recorded for this job:?Job K973:FormingCustomizing?Machine-hours5020?Direct labor-hours2050Required:a. Calculate the estimated total manufacturing overhead for the Forming Department.b. Calculate the predetermined overhead rate for the Customizing Department.c. Calculate the total overhead applied to Job K973 in both departments.

What will be an ideal response?

Answer 1

a. Forming Department overhead cost = Fixed manufacturing overhead cost + (Variable overhead cost per machine-hour × Total machine-hours in the department)
= $119,700 + ($2.00 per machine-hour × 19,000 machine-hours)
= $119,700 +$38,000 = $157,700

b. Customizing Department overhead cost = Fixed manufacturing overhead cost + (Variable overhead cost per direct labor-hour × Total direct labor-hours in the department)
= $67,200 + ($4.20 per direct labor-hour × 8,000 direct labor-hours)
= $67,200 + $33,600 = $100,800
Predetermined overhead rate = Estimated total manufacturing overhead cost ÷ Estimated total amount of the = $100,800 ÷8,000 direct labor-hours = $12.60 per direct labor-hour

c. Forming Department: Predetermined overhead rate = Estimated total manufacturing overhead cost ÷ Estimated total amount of the = $157,700 ÷ 19,000 machine-hours = $8.30 per machine-hour

Forming Department: Overhead applied to a particular job = Predetermined overhead rate × Amount of the allocation base incurred by the job = $8.30 per machine-hour × 50 machine-hours = $415

Customizing Department: Overhead applied to a particular job = Predetermined overhead rate × Amount of the allocation base incurred by the job = $12.60 per direct labor-hour × 50 direct labor-hours = $630

Overhead applied to Job K973