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 88,000             36,000

Direct labor-hours                                                      33,000                58,800

Direct materials cost                                                $ 187,000            $ 197,000

Direct labor cost                                                       $ 281,000            $ 515,000

Fixed manufacturing overhead cost                           $ 202,400            $ 540,960

Variable manufacturing overhead per machine-hour $ 2.80                    -

Variable manufacturing overhead per direct labor-hour -                        $ 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                            Fabrication

Machine-hours                                390                                          71

Direct labor-hours                             89                                       126

Direct materials cost                        $ 932                                  $ 1,220

Direct labor cost                               $ 750                                $ 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.)

2. Compute the total overhead cost applied to Job 127. (Round predetermined overhead rate to 2 decimal places and round your final answer to nearest whole dollar.) 3-a. What would be the total cost recorded for Job 127? (Round your predetermined overhead rate and intermediate calculations to 2 decimal places and round your final answer to nearest whole dollar.)

3-b. If the job contained 40 units, what would be the unit product cost? (Round predetermined overhead rate and final answer to 2 decimal places.)

4. At the end of the year, the records of WoodGrain Technology revealed the following actual cost and operating data for all jobs worked on during the year: (Round predetermined overhead rate to 2 decimal places.)

Department              Preparation                  Fabrication

Machine-hours            87,700                            24,300

Direct labor-hours         29,000                        52,000

Direct materials cost    $ 162,100                $ 414,000

Manufacturing overhead cost $ 456,770           $ 690,600

What was the amount of underapplied or overapplied overhead in each department at the end of the year?

Explanation / Answer

1. Predetermined overhead rates

2. Total overhead cost applied to Job 127

3-a. Total cost of Job 127

3-b. Unit product cost

4. Over/Under applied overheads

Preparation Fabrication Fixed manufacturing overhead cost $ 202400 540960 Machine hours 88000 Direct labor hours 58800 Predetermined fixed overhead rate $ 2.30 9.20 Variable manufacturing overhead rate $ 2.80 4.80 Total overhead rate $ 5.10 14.00

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