EXHIBIT 2-5 Dickson Company: An Example Using Multiple Predetermined Overhead Rates Step 1: Calculate the estimated...

Transcribed Image Text:

EXHIBIT 2-5 Dickson Company: An Example Using Multiple Predetermined Overhead Rates Step 1: Calculate the estimated total manufacturing overhead cost for each department. Milling Department Overhead Cost (Y): = $390,000+ ($2.00 per MH 60,000 MHs) $390,000+ $120,000 = $510,000 Assembly Department Overhead Cost (Y): = $500,000+ ($3.75 per DLH 80,000 DLHS) = $500,000+ $300,000 = $800,000 Step 2: Calculate the predetermined overhead rate in each department. Milling Department Overhead Rate: $510,000 60,000 machine-hours Assembly Department Overhead Rate: $800,000 80,000 direct labor-hours = $8.50 per machine-hour = $10.00 per direct labor-hour Step 3: Calculate the amount of overhead applied from both departments to Job 407. Milling Department: Overhead Applied to Job 407 = $8.50 per MH 90 MHS = $765 Step 4: Calculate the total job cost for Job 407. Assembly Department: Overhead Applied to Job 407 = $10.00 per DLH 20 DLHS = $200 Milling Assembly Total Direct materials $800 $370 $ 1,170 Direct labor $70 $280 350 Manufacturing overhead applied $765 $200 965 $2,485 Total cost of Job 407 Step 5: Calculate the selling price for Job 407. Total cost of Job 407 $2,485.00 Markup ($2,485 75%) 1,863.75 Selling price of Job 407 $4,348.75 EXHIBIT 2-5 Dickson Company: An Example Using Multiple Predetermined Overhead Rates Step 1: Calculate the estimated total manufacturing overhead cost for each department. Milling Department Overhead Cost (Y): = $390,000+ ($2.00 per MH 60,000 MHs) $390,000+ $120,000 = $510,000 Assembly Department Overhead Cost (Y): = $500,000+ ($3.75 per DLH 80,000 DLHS) = $500,000+ $300,000 = $800,000 Step 2: Calculate the predetermined overhead rate in each department. Milling Department Overhead Rate: $510,000 60,000 machine-hours Assembly Department Overhead Rate: $800,000 80,000 direct labor-hours = $8.50 per machine-hour = $10.00 per direct labor-hour Step 3: Calculate the amount of overhead applied from both departments to Job 407. Milling Department: Overhead Applied to Job 407 = $8.50 per MH 90 MHS = $765 Step 4: Calculate the total job cost for Job 407. Assembly Department: Overhead Applied to Job 407 = $10.00 per DLH 20 DLHS = $200 Milling Assembly Total Direct materials $800 $370 $ 1,170 Direct labor $70 $280 350 Manufacturing overhead applied $765 $200 965 $2,485 Total cost of Job 407 Step 5: Calculate the selling price for Job 407. Total cost of Job 407 $2,485.00 Markup ($2,485 75%) 1,863.75 Selling price of Job 407 $4,348.75