Tomey 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 T617.The following data were recorded for this job:
The total job cost for Job T617 is closest to:
A) $5,604
B) $2,584
C) $684
D) $3,020

Question

Tomey 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 T617.The following data were recorded for this job:
 The total job cost for Job T617 is closest to:
A) $5,604 
B) $2,584 
C) $684 
D) $3,020

Quizplus · Accepted Answer

Forming Department overhead cost = Fixed manufacturing overhead cost + (Variable overhead cost per machine-hour × Total machine-hours in the department)
= $99,000 + ($2.10 per machine-hour × 18,000 machine-hours)
= $99,000 +$37,800 = $136,800
Predetermined overhead rate = Estimated total manufacturing overhead cost ÷ Estimated total amount of the allocation base incurred = $136,800 ÷ 18,000 machine-hours = $7.60 per machine-hour
Overhead applied to a particular job = Predetermined overhead rate × Amount of the allocation base incurred by the job = $7.60 per machine-hour × 90 machine-hours = $684
Finishing Department overhead cost = Fixed manufacturing overhead cost + (Variable overhead cost per direct labor-hour × Total direct labor-hours in the department)
= $70,400 + ($3.70 per direct labor-hour × 8,000 direct labor-hours)
= $70,400 + $29,600 = $100,000
Predetermined overhead rate = Estimated total manufacturing overhead cost ÷ Estimated total amount of the allocation base incurred = $100,000 ÷8,000 direct labor-hours = $12.50 per direct labor-hour
Overhead applied to a particular job = Predetermined overhead rate × Amount of the allocation base incurred by the job = $12.50 per direct labor-hour × 60 direct labor-hours = $750
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Tomey Corporation Has Two Production Departments,Forming and Finishing