Dietzen Corporation has two manufacturing departments--Casting and Finishing. The company used the following data at the beginning of the year to calculate predetermined overhead rates:??CastingFinishingTotal?Estimated total machine-hours (MHs)4,0006,00010,000?Estimated total fixed manufacturing overhead cost$18,000$18,000$36,000?Estimated variable manufacturing overhead cost per MH$1.50$2.30?During the most recent month, the company started and completed two jobs--Job D and Job J. There were no beginning inventories. Data concerning those two jobs follow:??Job DJob J?Direct materials$14,300$6,800?Direct labor cost$21,700$8,800?Casting machine-hours2,7001,300?Finishing machine-hours2,4003,600Required:a. Assume that the company uses a plantwide predetermined
manufacturing overhead rate based on machine-hours. Calculate the total manufacturing cost assigned to Job D.b. Assume that the company uses a plantwide predetermined manufacturing overhead rate based on machine-hours. Calculate the total manufacturing cost assigned to Job J.
What will be an ideal response?
a. The first step is to calculate the estimated total overhead costs in the two departments.
Casting
| ? | Estimated fixed manufacturing overhead | $18,000 |
| ? | Estimated variable manufacturing overhead ($1.50 per MH × 4,000 MHs) | 6,000 |
| ? | Estimated total manufacturing overhead cost | $24,000 |
Finishing
| ? | Estimated fixed manufacturing overhead | $18,000 |
| ? | Estimated variable manufacturing overhead ($2.30 per MH × 6,000 MHs) | 13,800 |
| ? | Estimated total manufacturing overhead cost | $31,800 |
The second step is to combine the estimated manufacturing overhead costs in the two departments ($24,000 + $31,800 = $55,800) to calculate the plantwide predetermined overhead rate as follow:
| ? | Estimated total manufacturing overhead cost | $55,800 | ? |
| ? | Estimated total machine hours | 10,000 | MHs |
| ? | Predetermined overhead rate | $5.58 | per MH |
The overhead applied to Job D is calculated as follows:
Overhead applied to a particular job = Predetermined overhead rate x Machine-hours incurred by the job
= $5.58 per MH x (2,700 MHs + 2,400 MHs)
= $5.58 per MH x (5,100 MHs)
= $28,458
Job D's manufacturing cost:
| ? | Direct materials | $14,300 |
| ? | Direct labor cost | 21,700 |
| ? | Manufacturing overhead applied | 28,458 |
| ? | Total manufacturing cost | $64,458 |
b. The overhead applied to Job J is calculated as follows:
Overhead applied to a particular job = Predetermined overhead rate x Machine-hours incurred by the job
= $5.58 per MH x (1,300 MHs + 3,600 MHs)
= $5.58 per MH x (4,900 MHs)
= $27,342
Job J's manufacturing cost:
| ? | Direct materials | $6,800 |
| ? | Direct labor cost | 8,800 |
| ? | Manufacturing overhead applied | 27,342 |
| ? | Total manufacturing cost | $42,942 |
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