The company uses a job-order costing system in is based on machine-hours, and th

Question

The company uses a job-order costing system in is based on machine-hours, and the rate in the Painting Department is based on direct labor- High Desert Potteryworks makes a variety of pottery products that it sells to retailers. T predetermined overhead rates are used to apply manufacturing overhead cost to jobs. The predetermined hours. At the beginning of the year, the company provided the following estimates Department Molding Painting 35,000 53,580 85,00036,008 $161,500 $460,100 Direct labor-hours Machine-hours Fixed manufacturing overhead cost variable manufacturing overhead per machine-hour$ Variable manufacturing overhead per direct labor-hour 3.00 5.8

Explanation / Answer

Part 1 - Calculation of predetermined overhead rate

Predetermined overhead rate = Estimated Overhead cost/Estimated amount of allocation base

$255000

($3 Per machine hour * 85000 Machine Hours)

$267500

($5 per labour hour * 53500 Direct labour hours)

85000 Machine hours

53500 Labour Hours

Part 2 - Compute the total overhead cost applied to the job 205

Moulding department overhead applied

($4.9 per machine hour * 310 hours)

Painting department overhead applied

($13.6 per direct labour hours * 126 hours)

Part 3(a) - Calculation of total manufacturing cost for job 205

Part 3(b) - Calculation of unit production cost if job contained 28 units

Particulars Molding department (Machine hour intensive) Painting Department (Labour intensive) Fixed Manufacturing overhead $161500 $460100 Variable manufacturing overhead

$255000

($3 Per machine hour * 85000 Machine Hours)

$267500

($5 per labour hour * 53500 Direct labour hours)

Total Manufacturing Overhead (A) $416500 $727600 Allocation Base (B)

85000 Machine hours

53500 Labour Hours

Predetermined Overhead rate $4.9 Per machine hours $13.6 Per Direct labour hour

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