Question
WoodGrain Technology makes home office furniture from fine hardwoods. The company uses a job-order costing system and predetermined overhead rates to apply manufacturing overhead cost
WoodGrain Technology makes home office furniture from fine hardwoods. The company uses a job-order costing system and predetermined overhead rates to apply manufacturing overhead cost to jobs. The predetermined overhead rate in the Preparation Department is based on direct material costs, and the rate in the Fabrication Department is based on direct labour hours. At the beginning of the year, the companys management made the following estimates for the year:
| Department | |||||
| ||||||
| Preparation | Fabrication | ||||
Machine-hours |
| 80,000 |
|
| 21,000 |
|
Direct labour-hours |
| 35,000 |
|
| 65,000 |
|
Direct materials cost | $ | 190,000 |
| $ | 400,000 |
|
Direct labour cost | $ | 280,000 |
| $ | 530,000 |
|
Manufacturing overhead cost | $ | 426,000 |
| $ | 740,000 |
|
Job 127 was started on April 1 and completed on May 12. The companys cost records show the following information concerning the job:
| Department | |||||
| ||||||
| Preparation | Fabrication | ||||
Machine-hours |
| 360 |
|
| 80 |
|
Direct labour-hours |
| 90 |
|
| 140 |
|
Direct materials cost | $ | 950 |
| $ | 1,300 |
|
Direct labour cost | $ | 720 |
| $ | 990 |
|
Required:
- Compute the predetermined overhead rate used during the year in the Preparation Department. Compute the rate used in the Fabrication Department.
- Compute the total overhead cost applied to Job 127.
- What would be the total cost recorded for Job 127?
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