Stoke Corporation has two production departments, Forming and Assembly. 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 Assembly 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 A460. The following data were recorded for this job:
The amount of overhead applied in the Assembly Department to Job A460 is closest to: (Round your intermediate calculations to 2 decimal places.)
A) $415.00
B) $150.00
C) $565.00
D) $79,100.00

Question

Stoke Corporation has two production departments, Forming and Assembly. 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 Assembly 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 A460. The following data were recorded for this job:
 The amount of overhead applied in the Assembly Department to Job A460 is closest to: (Round your intermediate calculations to 2 decimal places.)
A) $415.00 
B) $150.00 
C) $565.00 
D) $79,100.00

Quizplus · Accepted Answer

Predetermined overhead rate for Forming Department = Estimated overhead costs / Estimated machine hours = $168,000 / 42,000 machine hours = $4.00 per machine hour.

Predetermined overhead rate for Assembly Department = Estimated overhead costs / Estimated direct labor-hours = $210,000 / 21,000 direct labor-hours = $10.00 per direct labor-hour.

The Forming Department used 800 machine hours (given in the table). The Assembly Department used 50 direct labor-hours (given in the table).

The amount of overhead applied to Job A460 in the Forming Department is:
$4.00 per machine hour × 650 machine hours used = $2,600.00

The amount of overhead applied to Job A460 in the Assembly Department is:
$10.00 per direct labor-hour × 50 direct labor-hours used = $500.00

Therefore, the total overhead applied to Job A460 is $2,600.00 + $500.00 = $3,100.00.

Hence, the amount of overhead applied in the Assembly Department to Job A460 is $500.00, which is closest to option C ($565.00) but it may be a bit lower because some of the overhead applied to the Forming Department may actually be used in the Assembly Department.

Stoke Corporation Has Two Production Departments, Forming and Assembly