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Golden Inc., has a job-order costing system. The company uses predetermined overhead rates in applying manufacturing overhead cost to individual jobs. The predetermined overhead rate
Golden Inc., has a job-order costing system. The company uses predetermined overhead rates in applying manufacturing overhead cost to individual jobs. The predetermined overhead rate in Preparation Department is based on direct labour- hours, and the rate in Finishing Department is based on direct materials cost. At the beginning of the most recent year, the company's management made the following estimates for the year: Preparation Finishing Department Department Machine-hours 70,000 19,000 Direct labour-hours 30,000 20,000 Direct materials cost $195,000 $350,000 Direct labour cost $260,000 $520,000 Manufacturing overhead cost $420,000 $700,000 Job 123 entered into production on April 1 and was completed on May 12. The company's cost records show the following information about the job: Machine-hours Direct labour-hours Direct materials cost Direct labour cost Preparation Department 250 70 $840 $610 Finishing Department 60 50 $1,100 $880 At the end of the year, the records of Golden showed the following actual cost and operating data for all jobs worked on during the year: Preparation Finishing Department Department Machine-hours 61,000 20,000 Direct labour-hours 28,000 46,000 Direct materials cost $156,000 $324,000 Manufacturing overhead cost $385,000 $660,000 Required: a. Compute the predetermined overhead rates for Preparation Department and Finishing Department. b. Compute the total overhead cost applied to Job 123. c. Compute the amount of underapplied or overapplied overhead in each department at the end of the current year
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