Boward Corporation has two production departments,Milling and Assembly.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 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 T818.The following data were recorded for this job:
The total amount of overhead applied in both departments to Job T818 is closest to:
A) $1,651
B) $608
C) $435
D) $1,043

Question

Boward Corporation has two production departments,Milling and Assembly.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 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 T818.The following data were recorded for this job:
 The total amount of overhead applied in both departments to Job T818 is closest to:
A) $1,651 
B) $608 
C) $435 
D) $1,043

Quizplus · Accepted Answer

Milling Department overhead cost = Fixed manufacturing overhead cost + (Variable overhead cost per machine-hour × Total machine-hours in the department)
= $120,600 + ($2.00 per machine-hour × 18,000 machine-hours)
= $120,600 +$36,000 = $156,600
Predetermined overhead rate = Estimated total manufacturing overhead cost ÷ Estimated total amount of the allocation base incurred = $156,600 ÷ 18,000 machine-hours = $8.70 per machine-hour
Overhead applied to a particular job = Predetermined overhead rate × Amount of the allocation base incurred by the job = $8.70 per machine-hour × 50 machine-hours = $435
Assembly Department overhead cost = Fixed manufacturing overhead cost + (Variable overhead cost per direct labor-hour × Total direct labor-hours in the department)
= $76,300 + ($4.30 per direct labor-hour × 7,000 direct labor-hours)
= $76,300 + $30,100 = $106,400
Predetermined overhead rate = Estimated total manufacturing overhead cost ÷ Estimated total amount of the allocation base incurred = $106,400 ÷7,000 direct labor-hours = $15.20 per direct labor-hour
Overhead applied to a particular job = Predetermined overhead rate × Amount of the allocation base incurred by the job = $15.20 per direct labor-hour × 40 direct labor-hours = $608
Overhead applied to Job T818
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Boward Corporation Has Two Production Departments,Milling and Assembly