Problem - Aggasi Company uses a job order cost systems in each of its three manufacturing departments. Manufacturing overhead is applied to jobs on the basis of direct labor cost in Department D, direct labor hours in Department E, and machine hours Department K.
In establishing the predetermined overhead rates for 2017, the following estimates were made for the year.
Department
D E K
Manufacturing overhead $ 1,200,000 $1,500,000 $900,000
Direct labor cost $1,500,000 $1,250,000 $450,000
Direct labor hours 100,000 125,000 40,000
Machine hours 400,000 500,000 120,000
During January, the job cost sheets showed the following costs and production data
Department
D E K
Direct material used $140,000 $126,000 $78,000
Direct labor costs $120,000 $110,000 $37,500
Manufacturing overhead incurred $ 99,000 $124,000 $79,000
Direct labor hours 8,000 11,000 3,500
Machine hours 34,000 45,000 10,400
Instructions -
(a) Compute the predetermined overhead rate for each department.
(b) Compute the total manufacturing costs assigned to jobs in January in each department.
(c) Compute the under or overapplied overhead for each department at January 31.