Asked by Normaly Valdez on May 30, 2024
Verified
Eisentrout Corporation has two production departments, Machining and Customizing. The company uses a job-order costing system and computes a predetermined overhead rate in each production department. The Machining Department's predetermined overhead rate is based on machine-hours and the Customizing Department's predetermined overhead rate is based on direct labor-hours. At the beginning of the current year, the company had made the following estimates: During the current month the company started and finished Job T272. The following data were recorded for this job:
The estimated total manufacturing overhead for the Machining Department is closest to:
A) $137,600
B) $104,000
C) $33,600
D) $310,933
Estimated Total Overhead
The anticipated amount of all overhead expenses for a specific period, used for budgeting and costing purposes.
Machining Department
A specific division within a manufacturing facility where machinery is used to process materials into finished products.
Manufacturing Overhead
All indirect costs associated with the production process of a company, such as utilities, depreciation, and salaries for management.
- Understand the concept of job-order costing and its application in manufacturing.
- Calculate apportioned overhead rates for distinct operational divisions.
Verified Answer
= $78,400 / 8,000 machine-hours
= $9.80 per machine-hour
Actual machine-hours used for Job T272 = 1,600 machine-hours
Therefore, actual overhead cost for Machining Department = $9.80 per machine-hour x 1,600 machine-hours = $15,680
Estimated total overhead cost for Customizing Department = $59,200
Customizing Department predetermined overhead rate = Estimated overhead cost / Estimated direct labor-hours
= $59,200 / 14,800 direct labor-hours
= $4.00 per direct labor-hour
Actual direct labor-hours used for Job T272 = 2,400 direct labor-hours
Therefore, actual overhead cost for Customizing Department = $4.00 per direct labor-hour x 2,400 direct labor-hours = $9,600
Total actual overhead cost for Job T272 = $15,680 + $9,600 = $25,280
The estimated total overhead cost for both departments = $78,400 + $59,200 = $137,600.
Learning Objectives
- Understand the concept of job-order costing and its application in manufacturing.
- Calculate apportioned overhead rates for distinct operational divisions.
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