Gercak Corporation has two production departments, Forming and Assembly. 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 Assembly 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:??FormingAssembly?Machine-hours16,00011,000?Direct labor-hours2,0007,000?Total fixed manufacturing overhead cost$100,800$76,300?Variable manufacturing overhead per machine-hour$1.70??Variable manufacturing overhead per direct labor-hour?$3.10During the current month the company started and finished Job X560. The following data were

Question

recorded for this job:?Job X560:FormingAssembly?Machine-hours5030?Direct labor-hours3040Required:a. Calculate the estimated total manufacturing overhead for the Assembly Department.b. Calculate the predetermined overhead rate for the Forming Department.c. Calculate the total amount of overhead applied to Job X560 in both departments.

What will be an ideal response?

Answer 1

a. Assembly Department overhead cost = Fixed manufacturing overhead cost + (Variable overhead cost per direct labor-hour × Total direct labor-hours in the department)
= $76,300 + ($3.10 per direct labor-hour × 7,000 direct labor-hours)
= $76,300 + $21,700 = $98,000

b. Forming Department overhead cost = Fixed manufacturing overhead cost + (Variable overhead cost per machine-hour × Total machine-hours in the department)
= $100,800 + ($1.70 per machine-hour × 16,000 machine-hours)
= $100,800 +$27,200 = $128,000
Forming Department: Predetermined overhead rate = Estimated total manufacturing overhead cost ÷ Estimated total amount of the = $128,000 ÷ 16,000 machine-hours = $8.00 per machine-hour

c. Forming Department: Overhead applied to a particular job = Predetermined overhead rate × Amount of the allocation base incurred by the job = $8.00 per machine-hour × 50 machine-hours = $400
Assembly Department: Predetermined overhead rate = Estimated total manufacturing overhead cost ÷ Estimated total amount of the = $98,000 ÷7,000 direct labor-hours = $14.00 per direct labor-hour
Assembly Department: Overhead applied to a particular job = Predetermined overhead rate × Amount of the allocation base incurred by the job = $14.00 per direct labor-hour × 40 direct labor-hours = $560

Overhead applied to Job X560