Question 3

Pollys Pots makes a variety of pottery products that it sells to a variety of retailers.

The company uses a job-order costing system in which predetermined overhead rates are used to apply manufacturing overhead cost to jobs.

The predetermined overhead rate in the Moulding Department is based on machine-hours, and the rate in the Painting Department is based on direct labour cost. At the beginning of the year, the companys management made the following estimates of the costs and hours to be working in the forthcoming year:

	Department
	Moulding	Painting
Direct labour-hours	12,000	60,000
Machine-hours	70,000	8,000
Direct materials cost	510,000	650,000
Direct labour cost	130,000	420,000
Manufacturing overhead cost	602,000	735,000

Job 205 was started on 1 August and completed on 10 August. The companys cost records show the following information concerning the job:

	Department
	Moulding	Painting
Direct labour-hours	30	85
Machine-hours	110	20
Materials placed into production	470	332
Direct labour cost	290	680

Required:

1. Compute the predetermined overhead rate used during the year in the Moulding Department and the rate used during the year in the Painting Department.

[5 marks]

2. Compute the total overhead cost applied to job 205.

[5 marks]

3. What would be the total cost recorded for job 205? If the job contained 50 units, what would be the cost per unit?

[5 marks]

4. At the end of the year, the records of Pollys Pots revealed the following actual cost and operating data for all jobs worked on during the year:

	Department
	Moulding	Painting
Direct labour-hours	10,000	62,000
Machine-hours	65,000	9,000
Direct materials cost	430,000	680,000
Direct labour cost	108,000	436,000
Manufacturing overhead cost	570,000	750,000

What was the amount of under- or over-applied overhead in each department at the end of the year?

[10 marks]

Total: 25 marks