P20-4A Agassi Company uses a job order cost system in each of its three manufact

Question

P20-4A Agassi Company uses a job order cost system in each of its three manufactur- Compute predetermined ing departments. Manufacturing overhead is applied to jobs on the basis of direct labor overhead rates, apply cost in Department D, direct labor hours in Department E, and machine hours in overhead, and calculate Department K under- or overapplied overhead. In establishing the predetermined overhead rates for 2017, the following estimates i were made for the year (LO 3, 5) Department Manufacturing overhead $1,200,000 $1,500,000 $900,000 Direct labor costs Direct labor hours Machine hours $1,500,000 100,000 400,000 $1,250,000$450,000 40,000 120,000 125,000 500,000 During January, the job cost sheets showed the following costs and production data Department Direct materials used Direct labor costs Manufacturing overhead incurred Direct labor hours Machine hours $ 99,000 8,000 34,000 $140,000 $126,000 $78,000 $120,000 $110,000 $37,500 $124,000 $79,000 3,500 10,400 11,000 45,000 Instructions (a) Compute the predetermined overhead rate for each department (a) 80%, $12, $7.50 (b) $356,000, $368,000, I (b) Compute the total manufacturing costs assigned to jobs in January in each depart- $193,500 (c) $3,000, $(8,000), $1,000 ment (c) Compute the under- or overapplied overhead for each department at January 31

Explanation / Answer

a) Predetermine overhead rate :

b) Total manufacturing cost assigned :

c) Over and under applied overhead :

Department D department E Department K budgeted overhead 1200000 1500000 900000 budgeted activity 1500000 125000 120000 predetermine overhead 80% of direct labour cost 12 per DLH 7.5 per Mh

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