Barbeau Corporation has two production departments, Milling and Customizing. The company uses a job-order costing system and computes a predetermined overhead rate in each production department. The Milling Department's predetermined overhead rate is based on machine-hours and the Customizing 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 A492. The following data were recorded for this job:

-The amount of overhead applied in the Milling Department to Job A492 is closest to:
A) $146,200.00
B) $144.00
C) $756.00
D) $774.00

Question

Barbeau Corporation has two production departments, Milling and Customizing. The company uses a job-order costing system and computes a predetermined overhead rate in each production department. The Milling Department's predetermined overhead rate is based on machine-hours and the Customizing 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 A492. The following data were recorded for this job:
 
-The amount of overhead applied in the Milling Department to Job A492 is closest to:
A) $146,200.00 
B) $144.00 
C) $756.00 
D) $774.00

Quizplus · Accepted Answer

Milling Department overhead cost = Fixed manufacturing overhead cost + (Variable overhead cost per machine-hour × Total machine-hours in the department)
= $119,000 + ($1.60 per machine-hour × 17,000 machine-hours)
= $119,000 +$27,200 = $146,200
Predetermined overhead rate = Estimated total manufacturing overhead cost ÷ Estimated total amount of the allocation base incurred = $146,200 ÷ 17,000 machine-hours = $8.60 per machine-hour
Overhead applied to a particular job = Predetermined overhead rate × Amount of the allocation base incurred by the job = $8.60 per machine-hour × 90 machine-hours = $774

Barbeau Corporation Has Two Production Departments, Milling and Customizing