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Oregon Conference Tables processes timber into large conference table tops. Production occurs in two phases - sawing and sanding. The sawing phase is almost entirely
Oregon Conference Tables processes timber into large conference table tops. Production occurs in two phases - sawing and sanding. The sawing phase is almost entirely automated and costs are largely driven by processing time on a computerized sawing machine. Sanding is a labor intensive process, and the amount of time on a particular job varies considerably based on the intrinsic stone quality and the desired sheen for a particular job. The Sawing Department applies factory overhead based on sawing machine hours. The Sanding Department applies factory overhead based on direct labor hours. The following table reveals estimates for the upcoming year. These estimates were used to determine the applicable factory overhead application rates: $ Direct labor Direct materials Factory overhead Direct labor hours Sawing machine hours Sawing 500,000 300,000 1,100,000 40,000 110,000 $ $ $ Sanding 3,200,000 24,000 720,000 200,000 n/a During the year, the company received and processed a table top order for a Fortune 500 company. The following table reveals information extracted from the materials requisition forms and daily time sheets relating to this particular job: Sawing 900 555 Sanding 5,310 $ $ Direct labor Direct materials Direct labor hours Sawing hours 210 189 n/a Looking back at the end of the year, the company determined that actual data were as follows: $ Direct labor Direct materials Factory overhead Direct labor hours Sawing machine hours Sawing 423,500 $256,900 1,015,000 33,600 96,233 Sanding 2,807,000 $28,000 658,000 211,750 n/a $ a) Determine the factory overhead application rates for each department. b) Compute the cost to be assigned to the Fortune job. The job had been bid to the customer at a sales price of $65 per square foot, and the final dimensions are 5 feet by 30 feet. Did the company make a profit on this job? c) Determine if overhead was underapplied or overapplied, and reassess the profit on the Fortune job. Worksheet 7 Sawing Sanding Total Direct labor Direct materials Factory overhead (189 X $10.00) Factory overhead (210 x $3.60) usus ulu Total Actual factory overhead Direct labor hours Sawing machine hours Applied overhead rate Applied overhead Underapplied overhead ilus $ $
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