Asked by ebony lofton on Jul 02, 2024
Verified
Garza Corporation has two production departments, Casting and Customizing. The company uses a job-order costing system and computes a predetermined overhead rate in each production department. The Casting 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: The estimated total manufacturing overhead for the Customizing Department is closest to:
A) $54,110
B) $30,100
C) $98,700
D) $68,600
Manufacturing Overhead
All indirect costs associated with manufacturing, such as utilities, maintenance, and factory management salaries, not directly tied to production.
Customizing Department
A specialized department within a company focused on modifying and tailoring products to meet specific customer requirements.
Job-Order Costing System
An accounting system that assigns costs to specific jobs or batches and is used to determine the cost of manufacturing each order.
- Ascertain the total envisaged manufacturing overhead for production divisions.
Verified Answer
The estimated total manufacturing overhead for the entire company is $343,000, which is the sum of the estimated overhead for the Casting Department and the estimated overhead for the Customizing Department ($218,000 + X = $343,000).
To solve for X (the estimated overhead for the Customizing Department), we need to subtract the estimated overhead for the Casting Department from the estimated total overhead for the company ($343,000 - $218,000 = $125,000).
Finally, we can use the predetermined overhead rate for the Customizing Department to calculate the estimated direct labor-hours for the department:
Predetermined overhead rate = Estimated overhead / Estimated direct labor-hours
$15 per direct labor-hour = $125,000 / Estimated direct labor-hours
Estimated direct labor-hours = $125,000 / $15 per direct labor-hour = 8,333.33 direct labor-hours
Therefore, the estimated total manufacturing overhead for the Customizing Department is:
Predetermined overhead rate x Estimated direct labor-hours = $15 per direct labor-hour x 8,333.33 direct labor-hours = $125,000
However, we are asked only for the estimated manufacturing overhead for the Customizing Department, not the entire company. Therefore, we need to subtract the estimated overhead for the Casting Department from the total overhead of the company, and we get:
Estimated overhead for Customizing Department = $343,000 - $218,000 = $125,000
So, the closest answer choice to the estimated overhead cost of the Customizing Department is $98,700 (Choice C).
Learning Objectives
- Ascertain the total envisaged manufacturing overhead for production divisions.
Related questions
Petty Corporation Has Two Production Departments, Milling and Finishing ...
Marciante Corporation Has Two Production Departments, Casting and Finishing ...
The Estimated Total Manufacturing Overhead for the Assembly Department Is ...
Dallman Corporation Uses a Job-Order Costing System with a Single ...
The Estimated Total Manufacturing Overhead Is Closest To