Hickingbottom Corporation has two production departments, Forming and Finishing. The company uses a job-order costing system and computes a predetermined overhead rate in each production department. The Forming 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 M381. The following data were recorded for this job:
The total job cost for Job M381 is closest to: (Round your intermediate calculations to 2 decimal places.)
A) $2,206
B) $616
C) $4,076
D) $1,870

Question

Hickingbottom Corporation has two production departments, Forming and Finishing. The company uses a job-order costing system and computes a predetermined overhead rate in each production department. The Forming 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 M381. The following data were recorded for this job:
 The total job cost for Job M381 is closest to: (Round your intermediate calculations to 2 decimal places.)
A) $2,206 
B) $616 
C) $4,076 
D) $1,870

Quizplus · Accepted Answer

Forming Department predetermined overhead rate = Estimated total manufacturing overhead cost / Estimated machine-hours = $88,000 / 20,000 machine-hours = $4.40 per machine-hour
Finishing Department predetermined overhead rate = Estimated total manufacturing overhead cost / Estimated direct labor-hours = $80,000 / 16,000 direct labor-hours = $5 per direct labor-hour

Job M381 required 200 machine-hours in the Forming Department and 100 direct labor-hours in the Finishing Department.

Forming Department overhead cost = Forming Department predetermined overhead rate x machine-hours used = $4.40 per machine-hour x 200 machine-hours = $880
Finishing Department overhead cost = Finishing Department predetermined overhead rate x direct labor-hours used = $5 per direct labor-hour x 100 direct labor-hours = $500

Direct materials cost = $1,200
Direct labor cost = $1,696
Total job cost = Direct materials cost + Direct labor cost + Forming Department overhead cost + Finishing Department overhead cost = $1,200 + $1,696 + $880 + $500 = $4,276
Rounded to the nearest dollar, the total job cost for Job M381 is $4,076. Therefore, the closest answer choice is C.

Hickingbottom Corporation Has Two Production Departments, Forming and Finishing