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Complete Question:
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:
Machining Customizing Machine-hours Direct labor-hours Total fixed manufacturing overhead cost Variable manufacturing overhead per machine-hour Variable manufacturing overhead per direct labor-hour 20,000 2,000 $90,000 $88,000 18,000 1,000 $ 2.00 $ 4.00 During the current month the company started and finished Job K973. The following data were recorded for this job: Job K973 Machine-hours Direct labor-hours Machining Customizing 70 40 40 60.
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.
Answer:
Madole Corporation
a. Calculation of the Estimated total manufacturing overhead:
Machining Customizing Total
Total fixed manufacturing overhead cost $90,000 $88,000 $178,000
Variable manufacturing overhead cost 36,000 80,000 116,000
Total overhead cost $126,000 $168,000 $294,000
Estimated total manufacturing overhead cost for the Forming Department = $126,000
b. Calculation of the predetermined overate rate for the Customizing Department = Overhead cost/Direct labor hours
= $168,000/2,000
= $84 per direct labor hour
For Forming department = $126,000/18,000 = $7 per machine hour
c. Total overhead applied to Job K973:
Machining = 70 * $7 = $490
Customizing = 60 * $84 = $5,040
Total overhead applied = $5,530
Explanation:
a) Data and Calculations:
Machining Customizing
Machine-hours 18,000 20,000
Direct labor-hours 1,000 2,000
Total fixed manufacturing overhead cost $90,000 $88,000
Variable manufacturing overhead per machine-hour $2.00
Variable manufacturing overhead per direct labor-hour $ 4.00
Data for Job K973
Machining Customizing
Machine-hours 70 40
Direct labor-hours 40 60
