Kalp Corporation has two production departments, Machining and Finishing. The company uses a job-order costing system and computes a predetermined overhead rate in each production department. The Machining Department's predetermined overhead rate is based on machine-hours and the Finishing Department's predetermined overhead rate is based on direct labor-hours. At the beginning of the current year, the company had made the following estimates: During the current month the company started and finished Job K928. The following data were recorded for this job:
The amount of overhead applied in the Machining Department to Job K928 is closest to:
A) $783.00
B) $810.00
C) $162.00
D) $171,000.00

Question

Kalp Corporation has two production departments, Machining and Finishing. The company uses a job-order costing system and computes a predetermined overhead rate in each production department. The Machining Department's predetermined overhead rate is based on machine-hours and the Finishing Department's predetermined overhead rate is based on direct labor-hours. At the beginning of the current year, the company had made the following estimates:  During the current month the company started and finished Job K928. The following data were recorded for this job:
 The amount of overhead applied in the Machining Department to Job K928 is closest to:
A) $783.00 
B) $810.00 
C) $162.00 
D) $171,000.00

Quizplus · Accepted Answer

The Machining Department's predetermined overhead rate is $15.00 per machine-hour ($375,000 ÷ 25,000 machine-hours). Job K928 required 54 machine-hours in the Machining Department, so the overhead applied to it is:
54 machine-hours × $15.00 per machine-hour = $810.00

Kalp Corporation Has Two Production Departments, Machining and Finishing