Management Account Question:

John- the management accountant has implemented a job-order costing system for Fridge-R-Fun using predetermined overhead rates. For this part, the focus is on two different processes in Fridges-R-Fun, namely, welding the pipes to the compressor and assembling the fridges. The predetermined overhead rate for welding is based on machine-hours and the predetermined overhead rate for assembly is based on direct labour-hours.

John has compiled the following estimates for Year 1:

Table 3 Estimates for Year 1

Estimates	Welding	Assembly
Direct labour-hours	3,600	7,200
Machine-hours	6,000	600
Fixed manufacturing overhead cost	288,000	64,800
Variable manufacturing overhead per machine-hour	$2.00	-
Variable manufacturing overhead per direct labour-hour	-	$1.00

The plan is to use the implemented job-order costing system for the following job:

Table 4 Job

Job	Welding	Assembly
Direct labour-hours	25	80
Machine-hours	40	5
Direct materials	$500	$200
Direct labour cost	$300	$800

Required:

Based on this specific job, answer the following questions:

a) Calculate the predetermined overhead rates used for welding and assembly. b) Calculate the total overhead cost applied to this specific job. c) Calculate the total manufacturing cost recorded for this specific job. d) Considering that this specific job contains 100 units, calculate the unit product cost. e) Considering the industry benchmark for the overhead for assembly is 75% of direct labour cost, identify whether this specific job has an overhead for assembly lower or higher than a job using the industry benchmark. Briefly explain what could cause a difference between this specific job and the industry benchmark for the assembly overhead cost.