Hickingbottom 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 M381. The following data were recorded for this job:

-The total job cost for Job M381 is closest to:
A) $2,206
B) $616
C) $4,076
D) $1,870

Question

Hickingbottom 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 M381. The following data were recorded for this job:
 
-The total job cost for Job M381 is closest to:
A) $2,206 
B) $616 
C) $4,076 
D) $1,870

Quizplus · Accepted Answer

Forming Department overhead cost = Fixed manufacturing overhead cost + (Variable overhead cost per machine-hour × Total machine-hours in the department)
= $96,900 + ($2.00 per machine-hour × 17,000 machine-hours)
= $96,900 +$34,000 = $130,900
Predetermined overhead rate = Estimated total manufacturing overhead cost ÷ Estimated total amount of the allocation base incurred = $130,900 ÷ 17,000 machine-hours = $7.70 per machine-hour
Overhead applied to a particular job = Predetermined overhead rate × Amount of the allocation base incurred by the job = $7.70 per machine-hour × 80 machine-hours = $616
Finishing Department overhead cost = Fixed manufacturing overhead cost + (Variable overhead cost per direct labor-hour × Total direct labor-hours in the department)
= $65,800 + ($3.60 per direct labor-hour × 7,000 direct labor-hours)
= $65,800 + $25,200 = $91,000
Predetermined overhead rate = Estimated total manufacturing overhead cost ÷ Estimated total amount of the allocation base incurred = $91,000 ÷7,000 direct labor-hours = $13.00 per direct labor-hour
Overhead applied to a particular job = Predetermined overhead rate × Amount of the allocation base incurred by the job = $13.00 per direct labor-hour × 40 direct labor-hours = $520
 11ea7761_194d_bee3_81a5_2dc918c803f0_TB2580_00

Hickingbottom Corporation Has Two Production Departments, Forming and Finishing