Deloria Corporation has two production departments, Forming and Assembly. The co

Question

Deloria 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 T288. The following data were recorded for this job:

The total amount of overhead applied in both departments to Job T288 is closest to:

Forming Assembly Machine-hours 19,000 15,000 Direct labor-hours 4,000 8,000 Total fixed manufacturing overhead cost $ 129,200 $ 77,600 Variable manufacturing overhead per machine-hour $ 1.60 Variable manufacturing overhead per direct labor-hour $ 3.00

Explanation / Answer

Pre-determined OH rate: Forming deptt (MH) Fixed: (129200/19000 MH) 6.8 Variable 1.6 OH rate per MH 8.4 Assembly deptt (DLH) Fixed (77600/8000) 9.7 Variable 3 Oh rate per DLH 12.7 Overheads applied in Job T288 Forming (80 MH @ 8.40) 672 Assembling (40 DLH @ 12.70) 508 Total Ohh cost applied 1180 Oh applied to Job T228 is $ 1180

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