Plumbing Works Inc. makes large and complex pumping systems for use in industrial machine shops to keep the internal components of machinery at a required temperature.The company custom designs and manufactures these machines for customers after a detailed contract and engineering design has been completed and signed off.It is not unusual for a customer to order a large number of the same item (which is unique for that customer) due to large number of machines at the customer's shops.

1Describe what is needed in the manufacturing process for direct materials, direct labor and manufacturing overhead (both variable and fixed).

The predetermined overhead rate in the Cutting Department is based on machine hours, and the rate in the Welding Department is based on direct labor-hours. At the beginning of the year, the company's management made the following estimates for the year:

Department Cutting Welding Machine-hours 450,000 65,000 Direct labor-hours 20,000 80,000 Direct materials cost $175,000 $500,000 Direct labor cost $150,000 $525,000 Fixed manufacturing overhead cost $200,000 $300,000 Variable manufacturing overhead per machine-hour $7.00 Variable manufacturing overhead per direct labor-hour $5.50Department Cutting Welding Machine-hours 250 100 Direct labor-hours 400 300 Direct materials cost $2,000 $1,800 Direct labor cost $6,000 $6,600Department Cutting Welding Machine-hours 100,000 25,000 Direct labor-hours 30,000 50,000 Direct materials cost $170,000 $450,000 Manufacturing overhead fixed and variable cost $800,000 $400,000