Asked by Chhor Sotheanea on May 28, 2024
Verified
Mahon Corporation has two production departments, Casting and Customizing. The company uses a job-order costing system and computes a predetermined overhead rate in each production department. The Casting 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 T138. The following data were recorded for this job:
The amount of overhead applied in the Customizing Department to Job T138 is closest to: (Round your intermediate calculations to 2 decimal places.)
A) $588.00
B) $95,200.00
C) $816.00
D) $228.00
Predetermined Overhead Rate
An estimated charge used to apply manufacturing overhead to individual products or job orders, calculated in advance of the period.
Machine-Hours
A measure of the total run time that a machine is utilized for production over a specific period, often used as a basis for allocating overhead costs.
Direct Labor-Hours
A measure of the total hours worked by employees who are directly involved in the manufacturing process or production of goods.
- Apply pre-determined overhead rates for the distribution of overhead costs among jobs.
- Evaluate the overhead expenses allocated to a job in a designated department.
Verified Answer
The job used 20 direct labor-hours in the Customizing Department, so the amount of overhead applied would be:
Predetermined overhead rate x Actual direct labor-hours used
$16.00 per DLH x 20 DLH = $320.00
Therefore, the correct answer is C) $816.00, which is the total amount of overhead applied to Job T138 after adding the amounts from both departments:
Casting Department: $496.00
Customizing Department: $320.00
Total Overhead Applied: $496.00 + $320.00 = $816.00.
Learning Objectives
- Apply pre-determined overhead rates for the distribution of overhead costs among jobs.
- Evaluate the overhead expenses allocated to a job in a designated department.
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