Openshaw Manufacturing Company made the following estimates at the beginning of the year:

Manufacturing overhead is applied on the basis of machine hours in the machining department and on the basis of direct labor hours in the painting department. During the year, the following two jobs were completed (there were no jobs in process at the beginning or end of the year):

Required:
1. Compute the predetermined overhead rate for each department.
2. Determine the amount of manufacturing overhead to be applied to each job.
3. Determine the total cost of each job.
4. Given that the actual manufacturing overhead costs for the year in the machining department and the painting department were $88,200 and $152,500, respectively; that the actual machine hours in the machining department were 18,100; and that the direct labor hours in the painting department were 21,600; compute the amount of over- or under-applied manufacturing overhead.
5. Interpretive Question: Why is the predetermined overhead rate based on estimated rather than actualinformation?

Transcribed Image Text:

Painting Machining Department Department S166,980 Direct labor costs Manufacturing overhead Machine hours Direct labor hours $219,000 $153,340 17,000 30,000 22,000