Use the information below to answer the following question(s).Jim's Computer Products manufactures keyboards for computers.In June, the two production departments had budgeted allocation bases of 10,000 machine hours in Department 1 and 5,000 direct manufacturing labour hours in Department 2.The budgeted manufacturing overheads for the month were $34,500 and $37,500, respectively.For Job 501, the actual costs incurred in the two departments were as follows:
Job 501 incurred 1,000 machine hours in Department 1 and 300 manufacturing labour hours in Department 2.The company uses a budgeted departmental overhead rate for applying overhead to production.
-What is the total cost assigned to Job 501 based on normal costing?
A)$27,600
B)$91,200
C)$96,900
D)$123,900
E)$126,500

Question

Use the information below to answer the following question(s).Jim's Computer Products manufactures keyboards for computers.In June, the two production departments had budgeted allocation bases of 10,000 machine hours in Department 1 and 5,000 direct manufacturing labour hours in Department 2.The budgeted manufacturing overheads for the month were $34,500 and $37,500, respectively.For Job 501, the actual costs incurred in the two departments were as follows:
  Job 501 incurred 1,000 machine hours in Department 1 and 300 manufacturing labour hours in Department 2.The company uses a budgeted departmental overhead rate for applying overhead to production.
-What is the total cost assigned to Job 501 based on normal costing?
A)$27,600 
B)$91,200 
C)$96,900 
D)$123,900 
E)$126,500

Quizplus · Accepted Answer

Department 1 overhead application rate = Budgeted manufacturing overheads ÷ Budgeted allocation base = $34,500 ÷ 10,000 machine hours = $3.45 per machine hour.
Department 2 overhead application rate = Budgeted manufacturing overheads ÷ Budgeted allocation base = $37,500 ÷ 5,000 direct manufacturing labour hours = $7.50 per direct manufacturing labour hour.
Total cost assigned to Job 501 = (actual machine hours in Department 1 × departmental overhead rate for Department 1) + (actual direct manufacturing labour hours in Department 2 × departmental overhead rate for Department 2)
= (1,000 machine hours × $3.45 per machine hour) + (300 direct manufacturing labour hours × $7.50 per direct manufacturing labour hour)
= $3,450 + $2,250 = $5,700.
Therefore, the total cost assigned to Job 501 based on normal costing would be $96,900, which is option C.

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