WoodGrain Technology makes home office furniture from ine hardwoods. The company

Question

WoodGrain Technology makes home office furniture from ine hardwoods. The company uses a job-order costing system and predetemined 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 drect labor-hours. At the beginning of the year, the company's management made the following estmates for the year 39.000 39,500 57600 $ 188,000 196.000 $275.000 522.000 162.000 $524,160 4.80 81,000 Direct materials cos Direct labor cost $ 2.80 Job 127 was started on Apri 1 and completed on May 12. The company's cost records show the following information concerning the job: 330 74 948 S 760 Direct laborhours % 1,240 S970 Direct labor cost Requred: 1. Compute the predetemined 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.) Preparaion department per DLH 15 MacBook Air

Explanation / Answer

Req 1: Pre determined overhead rate: Fixed overhead overhead rte of Preparartion deptt(basedon machine hours) = Total fixed overhead / machine hours (162,000/81,000) = $2 per MH Total overhead absroption rate permachine hour = fixed rate+ variable rate = 2+2.80 = 4.80 per MH Fixed overhead rate of Fabrication(based on labour hours) = Total fixed overheads/ labour hours (524160/57600) = $9.10 per labour hour Total Overhead rate per labour hour = Fixed rate+ variable rate = 9.10+4.80 = 13.90 per labour hour Preparation Deptt $4.80 Per MH Fabrication Deptt $13.90 Per Labour hour Req 2: Job 127: Machine hours of preparation deptt 330 Labour hours of fabrication deptt 131 Overheads cost: Preparation deptt(330 MH @4.80) 1584 Fabrication deptt(131 LH @13.90) 1820.9 Total overheads cost 3404.9 Req 3: TOTAL COST OF JOB 127 Preparation Fabrication Total Direct Material 948 1240 2188 Direct Labour 750 970 1720 Manufacturing overheads 1584 1820.9 3404.9 Total Cost 3282 4030.9 7312.9 Req 3B: Total Cots of Job 127 7312.9 Number of Units 24 Cost per unit(7312.90/24) $304.7 per unit Req 4: Underapplied / overapplied Overheads Actual Overheads Mahine hours Labour hours Absorption rate Overheads Absorbed Under Applied /(Overapplied) Preparation Deptt 397700 80500 $ 4.80 per MH 386400 11300 Underapplied Fabrication Deptt 742600 56000 $13.90 per LH 778400 -35800 Overapplied

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