Problem 20-4A Department D E K Department D E K Manufacturing Costs Manufacturin

Question

Problem 20-4A

Department

D

E

K

Department

D

E

K

Manufacturing Costs

Manufacturing Overhead

Problem 20-4A

Agassi Company uses a job order cost system in each of its three manufacturing departments. Manufacturing overhead is applied to jobs on the basis of direct labor cost in Department D, direct labor hours in Department E, and machine hours in Department K.

In establishing the predetermined overhead rates for 2017, the following estimates were made for the year.

Department

D

E

K

Manufacturing overhead $990,000 $1,750,000 $1,080,000 Direct labor costs $1,237,500 $1,875,000 $675,000 Direct labor hours 150,000 125,000 60,000 Machine hours 600,000 750,000 120,000
During January, the job cost sheets showed the following costs and production data.

Department

D

E

K

Direct materials used $210,000 $189,000 $117,000 Direct labor costs $180,000 $165,000 $56,250 Manufacturing overhead incurred $148,500 $168,000 $118,500 Direct labor hours 12,000 16,500 5,250 Machine hours 51,000 67,500 10,410

Explanation / Answer

(a)Compute the predetermined overhead rate for each department.

Department D      = 80%,

Department E = $14

Department K      = $9

Department D      = $9,90,000 / $12,37,500 = 80% Direct cost

Department E = $17,50,000 / 125,000 = $14 per direct labor hours

Department K      = $10,80,000/120,000 = $9 per machine hours

(b)Compute the total manufacturing costs assigned to jobs in January in each department

Department D      = $5,08,800,

Department E       = $5,85,000

Department K = $2,66,940

Manufacturing Costs   D                E                 K

Direct Materials             $210000     $189000     $117000

Direct labor                    $180000     $165000     $56250

Overhead applied          $118800     $231000     $93690

TOTAL $508800     $585000     $266940

             

(c)Compute the under- or overapplied overhead for each department at January 31.

Department D      = $29700    - Under Applied

Department E       = ($63000) - Overapplied

Department K      = $24810    - Under Applied

Manufacturing Costs   D                E                 K

Incurred $148500     $168000     $118500

Applied                          $118800     $231000     $93690

Under or Over $29700       ($63000)     $24810

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