Eastern Enterprises has three departments; Welding, Assembly and Spraying

.

Welding

calculates its predetermined overhead absorption rate based on machine hours; Assembly is based on direct labour hours while Spraying is based on direct labour cost. On 2021 January 01, the company had the following estimates:

WELDING

ASSEMBLY

SPRAYING

Production overhead costs

$720 000

$700 000

$120 000

$412 500

Direct labour cost

$35.000

$150 000

Machine hours

36.000

2.500

5.000

Direct labour hours

4.000

20 000

8.000

The labour rate is $150 per hour for all departments.

Job 303A which was started and completed during the year showed the following:

WELDING

ASSEMBLY

SPRAYING

Direct material

$5 500

$7 200

$9.500

Direct labour hours

80

150

100

Machine hours

800

100

50

Rental of equipment for job 303A will amount to $35 275.

Additional Information:

Eastern Enterprises recovers selling, distribution and administrative overheads at a rate of 20%

of production costs and profit is based on a margin of 20%.

A. Compute overhead absorption rates for each department.

B. Calculate the cost of Job 303A, clearly showing expected profit and selling price.