Georgia Woods, INc. manufactures furnitures to customers' specifications and uses job order costing. A predetermined overhead rate is used in applying manufacturing overhead to individual jobs. In Department One, overhead is applied on the basis of machine-hours, and in Department Two, on the basis of the direct labor hours.
At the beginning of the current year, management made the following budget estimates to assist in detemining the overhead application rate: Department One Department Two Direct labor cost $300,000 $225,000 Direct labor hours 20,000 15,000 Manufacturing overhead $420,000 $337,500 Machine-hours 12,000 7,500 Production of a batch of custom furniture ordered by City Furniture (job no.58) was started early in the year and completed three weeks on January 29.
The records for this job show the following cost information: Department One Department Two Job order for City Furniture (job no. 58) Direct materials cost $10,100 $7,600 Direct labor cost $16,500 $11,100 Direct labor hours 1,100 740 Machine-hours 750 500 Selected additional information for January is as follows:
Department One Department Two Direct labor hours-month of January 1,600 1,200 Machine-hours- month of January 1,100 600 Manufacturing overhead incurred in January $39,010 $26,540
Instructions
a. Compute the predetermined overhead rate for each department.
b. What is the total cost of the furniture prouced for City Furniture?
c. Prepare the entries required to record the sale (on account) of the furniture to City Furniture. THe sales price of the order was $147,00.
d. Determined the over or underapplied overhead for each department at the end of January.