Asked by Total Sport Productions on Apr 25, 2024
Verified
Gercak Corporation has two production departments, Forming and Assembly.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 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 X560.The following data were recorded for this job: Required:
a.Calculate the estimated total manufacturing overhead for the Assembly Department.
b.Calculate the predetermined overhead rate for the Forming Department.
c.Calculate the total amount of overhead applied to Job X560 in both departments.
Manufacturing Overhead
All indirect costs associated with the production of goods, such as utilities, maintenance, and salaries for indirect labor.
Direct Labor-Hours
The total hours of labor directly involved in manufacturing a product.
Machine-Hours
A measure of the amount of time a machine is operated, used in calculating manufacturing overhead rates.
- Determine the anticipated overall manufacturing overhead expenses for a designated period.
- Compute the predetermined rate for overheads by considering different allocation metrics (machine-hours, direct labor-hours).
- Allocate specific overhead costs to jobs utilizing the predetermined rate.
Verified Answer
= $76,300 + ($3.10 per direct labor-hour × 7,000 direct labor-hours)
= $76,300 + $21,700 = $98,000
b.Forming Department overhead cost = Fixed manufacturing overhead cost + (Variable overhead cost per machine-hour × Total machine-hours in the department)
= $100,800 + ($1.70 per machine-hour × 16,000 machine-hours)
= $100,800 +$27,200 = $128,000
Forming Department: Predetermined overhead rate = Estimated total manufacturing overhead cost ÷ Estimated total amount of the = $128,000 ÷ 16,000 machine-hours = $8.00 per machine-hour
c.Forming Department: Overhead applied to a particular job = Predetermined overhead rate × Amount of the allocation base incurred by the job = $8.00 per machine-hour × 50 machine-hours = $400
Assembly Department: Predetermined overhead rate = Estimated total manufacturing overhead cost ÷ Estimated total amount of the = $98,000 ÷7,000 direct labor-hours = $14.00 per direct labor-hour
Assembly Department: Overhead applied to a particular job = Predetermined overhead rate × Amount of the allocation base incurred by the job = $14.00 per direct labor-hour × 40 direct labor-hours = $560
Overhead applied to Job X560
Learning Objectives
- Determine the anticipated overall manufacturing overhead expenses for a designated period.
- Compute the predetermined rate for overheads by considering different allocation metrics (machine-hours, direct labor-hours).
- Allocate specific overhead costs to jobs utilizing the predetermined rate.
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