1. Inchworm 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 labour cost in Department A, and machine hours in Department B.

The following estimates were made for the year:

	Dept A	Dept B
Manufacturing overhead	$1,056,000	$840,000
Direct labour cost	$264,000	$600,000
Direct labour hours	12,000	40,000
Machine hours	75,000	84,000

a. Calculate the predetermined overhead rate for each department (4 marks)

b. Complete the two job cost sheets by applying overhead using the predetermined rates from part a. (4 marks)

i) Job 14 related to Dept A. used 2,000 direct labour hours and 5,000 machine hours

ii) Job 15 related to Dept B used 1,700 direct labour hours and 4,000 machine hours

c. Assume that the above two jobs were the only jobs the company completed for the year. If actual manufacturing overhead incurred was $150,000, determine if overhead was under- or over-applied and by how much. (2 marks)

ANSWER:

a. Pretermined Overhead Rate Department A =

Predermined Overhead Rate Department B =

b.

Slower Company Job Cost Sheet Department A
Job No.		14	Date requested	January 5, 2018
For		Matt Company	Date completed	January 31, 2018
Date		Direct Materials	Direct Labour	Manufacturing Overhead
January, 2018		$34,000	$24,000	(1 mrk)
	Cost of completed job:
	Direct Materials
	Direct Labour
	Manufacturing overhead
	Total cost			(1 mrk)

Slower Company Job Cost Sheet Department B
15	Date requested	January 12, 2018
Illuminated Ally	Date completed	January 31, 2018
Direct Materials	Direct Labour	Manufacturing Overhead
$31,000	$25,500	(1 mrk)
Cost of completed job:
Direct Materials
Direct Labour
Manufacturing overhead
Total cost			1 mrk)

c. Is overhead over or under applied?

By how much?