High Desert Potteryworks makes a variety of pottery products that it sells to re

Question

High Desert Potteryworks makes a variety of pottery products that it sells to retailers. The company uses a job-order costing system in which departmental predetermined overhead rates are used to apply manufacturing overhead cost to jobs. The predetermined overhead rate in the Molding Department is based on machine-hours, and the rate in the Painting Department is based on direct labor-hours. At the beginning of the year, the company provided the following estimates:

Job 205 was started on August 1 and completed on August 10. The company's cost records show the following information concerning the job:

Required:

1. Compute the predetermined overhead rates used in the Molding Department and the Painting Department.

2. Compute the total overhead cost applied to Job 205.

3-a. What would be the total manufacturing cost recorded for Job 205?

3-b. If the job contained 21 units, what would be the unit product cost?

Department Molding Painting Direct labor-hours 37,500 50,800 Machine-hours 85,000 38,000 Fixed manufacturing overhead cost $ 170,000 $ 472,440 Variable manufacturing overhead per machine-hour $ 2.80 - Variable manufacturing overhead per direct labor-hour - $ 4.80

Explanation / Answer

1. Compute the predetermined overhead rates used in the Molding Department and the Painting Department.

Molding department = (170000/85000)+2.80 = 4.80 per machine hour

Painting department = (472440/50800)+4.80 = 14.10 per labour hour

2) Total overhead cost applied = (310*4.80+132*14.10) = 3349.20

3) Total manufacturing cost = 944+1200+720+950+3349.20 = $7163.20

4) Unit product cost = 7163.20/21 = $341.10 per unit

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