Karine Corp has two production departments, Machining and Customization. The com

Question

Karine Corp has two production departments, Machining and Customization. The company uses a job-order costing system and computes a predetermined overhead rate in each production department. The Machining department’s predetermined overhead rate is based on machine hours and the Customization department’s predetermined overhead rate is based on direct labor hours. The company has made the following estimates for the two production departments:

The following data was recorded for Job 2110:

5. What is the predetermined overhead rate for the Machining Department?

6. What is the predetermined overhead rate for the Customization Department?

7. What was the total cost of Job 2110?

8. If the company marks up its manufacturing costs by 40%, then what is the total selling price for Job 2110 (rounded to nearest dollar)?

Machining Customization Machine hours 16,000 11,000 Direct labor hours 18,000 6,000 Total fixed manufacturing overhead cost $92,800 $28,800 Variable manufacturing overhead per machine hour $1.20 - Variable manufacturing overhead per labor hour - $5.00

Explanation / Answer

5. Predetermined overhead rate for Machining Department = Total fixed manufacturing overhead cost/Estimated Machine hours = $92800/16000 = $5.80 per machine hour

6. Predetermined overhead rate for Customization Department = Total fixed manufacturing overhead cost/Estimated Direct labor hours = $28800/6000 = $4.80 per direct labor hour

7.

8.

Job 2110 Direct materials ($430 + $180) 610 Direct labor cost ($800 + $540) 1340 Variable manufacturing overhead: Machining (50 x $1.20) 60 Customization (30 x $5.00) 150 Fixed manufacturing overhead: Machining (50 x $5.80) 290 Customization (30 x $4.80) 144 Total cost $ 2594

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