Quick Silver Company has two departments, X and Y. Overhead is applied based on

Question

Quick Silver Company has two departments, X and Y. Overhead is applied based on direct labor cost in Department X and machine-hours in Department Y. The following additional information is available: Budgeted Amounts Department X Department Y Direct labor cost $180,000 $165,000 Factory overhead $225,000 $200,000 Machine-hours 51,000 mh 40,000 mh Actual data for Job #25 Department X Department Y Direct materials requisitioned $15,000 $18,000 Direct labor cost $11,000 $14,000 Machine-hours 5,000 mh 3,000 mh Required: a. Compute the budgeted factory overhead rate for Department X. 225,000/180,000 = 1.25 or 125% b. Compute the budgeted factory overhead rate for Department Y. 200,000/40,000 = $5 per machine- hour c. What is the total overhead cost of Job 25?

Explanation / Answer

Solution:

a. Department X

Budgeted factory overhead rate = Factory overhead/Direct labor cost

Budgeted factory overhead rate = $225,000/$180,000

Budgeted factory overhead rate = 1.25 or 125%

b. Department Y

Budgeted factory overhead rate = Factory overhead/Machine hours

Budgeted factory overhead rate = $200,000/40,000

Budgeted factory overhead rate = $5 per machine hour

c. Total overhead cost for Job 25 = $11,000 x 1.25 + 5 x 3,000

Total overhead cost for Job 25 = $28,750

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