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 to jobs. The predetermined overhead rate in the Preparation Department is based on machine- hours. and the rate in the Fabrication 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 Preparation Fabrication Machine-hours 80,000 21,000 Direct labor-hours a 35,000 50,000 Direct materials cost \$190,000 \$400,000 Direct labor cost \$280,000 \$530,000 Fixed manufacturing overhead cost \$256,000 \$520,000 Variable manufacturing overhead per machine-hour \$2.00 - Variable manufacturing overhead per direct labor-hour - \$4.00

Job 127 was started on April 1 and completed on May 12. The company's cost records show the following information concerning the job:

 Department Preparation Fabrication Machine-hours 350 70 Direct labour-hours 80 130 Direct materials cost \$940 \$1,200 Direct labour cost \$710 \$980

Required:

1. Compute the predetermined overhead rate used during the year in the Preparation Department. Compute the rate used in the Fabrication Department.

2. Compute the total overhead cost applied to Job 127.

3. What would be the total cost recorded for Job 127? If the job contained 25 units, what would be the unit product cost?

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

 Department Preparation Fabrication Machine-hours 73,000 24,000 Direct labour-hours 30,000 54,000 Direct materials cost \$165,000 \$420,000 Manufacturing overhead cost \$390,000 \$740,000

What was the amount of underapplied or overapplied overhead in each department at the end of the year?

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##### Reference No:- TGS02051819

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