Problem:
Acquatic Manufacturing uses a job order cost system in each of its three manufacturing departments. Manufacturing overhead is applied to jobs on the basis of direct labor cost in Department A, direct labor hours in Department B, and machine hours in Department C.
In establishing the predetermined overhead rates for 2005 the following estimates were made for the year.
Compute predetermined overhead rates, apply overhead, and calculate under- or overapplied overhead.
Department
A B C
Direct materials used $92,000 $86,000 $64,000
Direct labor cost $48,000 $35,000 $50,400
Manufacturing overhead incurred $76,000 $74,000 $61,500
Direct labor hours 4,000 3,500 4,200
Machine hours 8,000 10,500 12,600
Department
A B C
Manufacturing overhead $930,000 $800,000 $750,000
Direct labor cost $600,000 $100,000 $600,000
Direct labor hours 50,000 40,000 40,000
Machine hours 100,000 120,000 150,000
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.