Problem:
(Departmental rates) All jobs at Frankfurt Inc., which uses a job order costing system, go through two departments (Fabrication and Assembly). Overhead is applied to jobs based on machine hours in Fabrication and on labor hours in Assembly. In December 2009, corporate management estimated the following production data for 2010 in setting its predetermined OH rates:
|
Fabrication
|
Assembly
|
|
Machine hours
|
104,000
|
44,000
|
|
Direct labor hours
|
50,400
|
320,000
|
|
Departmental overhead
|
$1,560,000
|
$1,760,000
|
Two jobs completed during 2010 were #2296 and #2297. The job order cost sheets showed the following information about these jobs:
|
Job #2296
|
Job #2297
|
|
Direct material cost
|
$118,500
|
$147,200
|
|
Direct labor hours-Fabrication
|
900
|
460
|
|
Machine hours-Fabrication
|
1,800
|
900
|
|
Direct labor hours-Assembly
|
850
|
400
|
|
Machine hours-Assembly
|
108
|
46
|
Direct labor workers are paid $12 per hour in the Fabrication Department and $10 per hour in the Assembly Department.
a. Compute the predetermined OH rates used in Fabrication and Assembly for 2010.
b. Compute the direct labor cost associated with each job for both departments.
c. Compute the amount of overhead assigned to each job in each department.
d. Determine the total cost of Jobs #2296 and #2297.
e. Actual data for 2010 for each department are as follows:
|
Fabricating
|
Assembly
|
|
Machine hours
|
103,200
|
43,200
|
|
Direct labor hours
|
47,800
|
324,000
|
|
Departmental overhead
|
$1,528,000
|
$1,790,000
|
What is the amount of underapplied or overapplied overhead for each department for the year ended December 31, 2010?