Landis Company uses a job order cost system in each of its two manufacturing dep
ID: 2426809 • Letter: L
Question
Landis Company uses a job order cost system in each of its two manufacturing departments. Manufacturing overhead is applied to jobs on the basis of direct labor cost in Department A and machine hours in Department B. In establishing the predetermined overhead rates for 2017, the following estimates were made for the year: Department A B Manufacturing overhead $2,100,000 $1,400,000 Direct labor cost 1,500,000 1,200,000 Direct labor hours 100,000 100,000 Machine hours 200,000 400,000 During January, the job cost sheet showed the following costs and production data: Department A B Direct materials used $195,000 $128,000 Direct labor cost 100,000 110,000 Manufacturing overhead incurred 130,000 135,000 Direct labor hours 8,000 8,400 Machine hours 16,000 34,000
Explanation / Answer
Predetermined overhead rate for Department A = estimated overhead /estimated direct labor cost
= 2,100,000 / 1,500,000
= 1.4 or 140 % of direct labor cost
Fo department B = 1,400,000 / 400,000
= 3.5 per machine hour
Manufacturing overhead applied during the yeAr:
Department A = 140% of 100,000 = $ 140,000
Department B = 3.5 * 34000 = $ 119,000
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