WoodGrain Technology makes home office furniture from fine hardwoods. The compan

Question

WoodGrain Technology makes home office furniture from fine hardwoods. The company uses a job-order costing system and predetermined overhead rates to apply manufacturing overhead cost to jobs. The predetermined overhead rate in the Preparation Department is based on machine hours, and the rate in the Fabrication Department is based on direct labor-hours. At the beginning of the year, the company's management made the following estimates for the year: Department Preparation Fabrication Machine-hours Direct labor-hours 84,000 36,000 Direct materials cost Direct labor cost Fixed manufacturing overhead cost Variable manufacturing overhead per machine-hour Variable manufacturing overhead per direct labor-hour 32,000 53,600 195,000 $205,000 $270,000 $512,000 $193,200$493,120 $ 2.80 $4.80 Job 127 was started on April 1 and completed on May 12. The company's cost records show the following information concerning the job Department Preparation Machine-hours Direct labor-hours Direct materials cost Direct labor cost 390 71 932 740 Fabrication 73 135 $1,180 980 Requred 1. Compute the predetermined overhead rate used during the year in the Preparation Department. Compute the rate used in the Fabrication Department. (Round predetermined overhead rate to 2 decimal places.) Predetermined Overhead Rate Preparation department per MH Fabrication department per DLH

Explanation / Answer

1a)Preparation department = [estimated Fixed manufacturing cost / estimated Machine hours] +variable overhead per MH

   =[193200/84000]+2.8

     = 2.3+2.8

     = $ 5.1 Per MH

Fabrication department= [estimated Fixed manufacturing cost / estimated Direct labor hours] +variable overhead per DLH

   = [[493120/53600]+ 4.8

      = 9.2+4.8

       = $ 14 Per DLH

2)Overhead applied to Job 127 = [Actual MH * overhead rate for preparation department ]+ [Actual DLH*overhead rate for fabrication department ]

     [390*5.1]+[135*14]

      1950+ 1890

        3840

3)a )

3b)unit product cost= total cost /number of units

         = 7672/ 38

         = $ 201.89 per unit

4)

preparation Fabrication Total Direct material 932 1180 2112 Direct labor 740 980 1720 manufacturing overhead 1950 1890 3840 Total 3622 4050 7672

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