High Desert Potteryworks makes a variety of pottery products that it sells to re

Question

High Desert Potteryworks makes a variety of pottery products that it sells to retailers. The company uses a job-order costing system in which departmental predetermined overhead rates are used to apply manufacturing overhead cost to jobs. The predetermined overhead rate in the Molding Department is based on machine-hours, and the rate in the Painting Department is based on direct labor-hours. At the beginning of the year, the company provided the following estimates:

Job 205 was started on August 1 and completed on August 10. The company's cost records show the following information concerning the job:

Required:

1. Compute the predetermined overhead rates used in the Molding Department and the Painting Department.

2. Compute the total overhead cost applied to Job 205.

3-a. What would be the total manufacturing cost recorded for Job 205?

3-b. If the job contained 38 units, what would be the unit product cost?

Department Molding Painting Direct labor-hours 30,500 57,900 Machine-hours 86,000 38,000 Fixed manufacturing overhead cost $ 275,200 $ 544,260 Variable manufacturing overhead per machine-hour $ 2.40 - Variable manufacturing overhead per direct labor-hour - $ 4.40

Explanation / Answer

Predetermined overhead rates

In molding Department (based on machine hours)= $275200/86000=$3.20

In painting Department(based on labour hours)=$544260/57900=$9.40

Total overhead cost of the job

Molding deptt=$3.20×320=$1024

Painting deptt=$9.40×127=$1193.8

Total=$2217.80

Total manufacturing cost for the job=

Direct Material=$2140

Direct Labour=$1690

Variable overhead=($2.4×320)+($4.4×127)=$1326.80

Allocated fixed overheads=$2217.80

Total manufacturing cost for the job=$7374.60

Unit product cost=$7374.60/38units=$194.068/- per unit

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