Malakan Corporation has two production departments,Machining and Finishing.The company uses a job-order costing system and computes a predetermined overhead rate in each production department.The Machining 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 K368.The following data were recorded for this job:
The amount of overhead applied in the Machining Department to Job K368 is closest to:
A) $856.00
B) $168.00
C) $624.00
D) $140,400.00

Question

Malakan Corporation has two production departments,Machining and Finishing.The company uses a job-order costing system and computes a predetermined overhead rate in each production department.The Machining 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 K368.The following data were recorded for this job:
 The amount of overhead applied in the Machining Department to Job K368 is closest to:
A) $856.00 
B) $168.00 
C) $624.00 
D) $140,400.00

Quizplus · Accepted Answer

Machining Department overhead cost = Fixed manufacturing overhead cost + (Variable overhead cost per machine-hour × Total machine-hours in the department)
= $102,600 + ($2.10 per machine-hour × 18,000 machine-hours)
= $102,600 +$37,800 = $140,400
Predetermined overhead rate = Estimated total manufacturing overhead cost ÷ Estimated total amount of the allocation base incurred = $140,400 ÷ 18,000 machine-hours = $7.80 per machine-hour
Overhead applied to a particular job = Predetermined overhead rate × Amount of the allocation base incurred by the job = $7.80 per machine-hour × 80 machine-hours = $624

Malakan Corporation Has Two Production Departments,Machining and Finishing