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: (Round your intermediate calculations to 2 decimal places.)
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: (Round your intermediate calculations to 2 decimal places.)
A) $146,200.00 
B) $144.00 
C) $756.00 
D) $774.00

Quizplus · Accepted Answer

The Milling Department's predetermined overhead rate is calculated as follows:

Predetermined overhead rate = Estimated overhead cost / Estimated machine-hours
= $439,200 / 46,000 machine-hours
= $9.55 per machine-hour

For Job A492, the Milling Department used 5,000 machine-hours, so the amount of overhead applied in the Milling Department is:

Overhead applied = Predetermined overhead rate x Actual machine-hours used
= $9.55 per machine-hour x 5,000 machine-hours
= $47,750.00

Therefore, the answer is D) $774.00, which is the amount of overhead applied in the Customizing Department to Job A492 based on the predetermined overhead rate of $0.09 per direct labor-hour and the actual direct labor-hours used of 8,600.

Barbeau Corporation Has Two Production Departments, Milling and Customizing