Agassi Company uses a job order cost system in each of its three manufacturing d
ID: 2578490 • Letter: A
Question
Agassi Company uses a job order cost system in each of its three manufacturing departments. Manufacturing overhead is applied to jobs on the basis of direct labor cost in Department D, direct labor hours in Department E, and machine hours in Department K. In establishing the predetermined overhead rates for 2017, the following estimates were made for the year. Department D E K Manufacturing overhead $1,240,000 $1,250,000 $720,000 Direct labor costs $1,550,000 $1,500,000 $540,000 Direct labor hours 120,000 125,000 48,000 Machine hours 480,000 600,000 120,000 During January, the job cost sheets showed the following costs and production data. Department D E K Direct materials used $168,000 $151,200 $93,600 Direct labor costs $144,000 $132,000 $45,000 Manufacturing overhead incurred $118,800 $120,000 $94,800 Direct labor hours 9,600 13,200 4,200 Machine hours 40,800 54,000 10,470 Compute the predetermined overhead rate for each department. (Round answers to 2 decimal places, e.g. 10.25.) Overhead rate Department D % Department E $ per direct labor hour Department K $ per machine hour Link to Text Link to Text Compute the total manufacturing costs assigned to jobs in January in each department. (Round answers to 0 decimal places, e.g. 2,500.) Manufacturing Costs Department D $ Department E $ Department K $ Link to Text Link to Text Compute the under- or overapplied overhead for each department at January 31. (Round answers to 0 decimal places, e.g. 2,525.) Manufacturing Overhead Department D $ Overapplied Underapplied Department E $ Underapplied Overapplied Department K $ Overapplied Underapplied
Explanation / Answer
1. Predetermined overhead rate:
=Estimated overhead/estimated activity base
Department D:$1,240,000/$1,550,000=80% of direct labour cost
Department E:$1,250,000/125,000 labour hours=$10 per direct labour hours
Department K:$720,000/120,000 machine hours=$6 per machine hours
2. Total manufacuring cost:
Overhead applied
$115,200
(144,000×80%)
$132,000
(13200×$10)
$62,820
(10470×$6)
3.
Overhead applied
$115,200
(144,000×80%)
$132,000
(13200×$10)
$62,820
(10470×$6)
Manufacturing costs D E K Direct material $168,000 $151,200 $93,600 Direct labour $144,000 $132,000 $45,000Overhead applied
$115,200
(144,000×80%)
$132,000
(13200×$10)
$62,820
(10470×$6)
Total manufacturing costs $427,200 $415,200 $201,420