High Desert Potteryworks makes a variety of pottery products that it sells to retailers such as Home Depot. The company uses a job-order costing system in which predetermined overhead rates are used to apply manufacturing overhead cost to jobs. The predetermined overhead rate in the Molding Department is based on machine-hours, and the rate in the Painting Department is based on direct labor-hours. At the beginning of the year, the company's management made the following estimates:

High Desert Potteryworks makes a variety of pottery products that it sells to retailers such as Home Depot. The company uses a job-order costing system in which predetermined overhead rates are used to apply manufacturing overhead cost to jobs. The predetermined overhead rate in the Molding Department is based on machine-hours, and the rate in the Painting Department is based on direct labor-hours. At the beginning of the year, the company's management made the following estimates:

  

	Department
	Molding	Painting
Direct labor-hours	12,000	60,000
Machine-hours	70,000	8,000
Direct materials cost	$510,000	$650,000
Direct labor cost	$130,000	$420,000
Fixed manufacturing overhead cost	$497,000	$615,000
Variable manufacturing overhead per machine-hour	$1.50	-
Variable manufacturing overhead per direct labor-hour	-	$2.00

 

Job 205 was started on August 1 and completed on August 10. The company's cost records show the following information concerning the job:

  

	Department
	Molding	Painting
Direct labor-hours	30	84
Machine-hours	110	20
Materials placed into production	$470	$332
Direct labor cost	$325	$588

 

Required:

1.

Compute the predetermined overhead rate used during the year in the Molding Department. Compute the rate used in the Painting Department. (Round your answers to 2 decimal places.) Explanation: 1. Molding Department: The estimated total manufacturing overhead cost in the Molding Department is computed as follows:                   Y = $497,000 + $1.50 per MH × 70,000 MH        Estimated fixed manufacturing overhead $ 497,000      Estimated variable manufacturing overhead:      $1.50 per MH × 70,000 MHs 105,000           Estimated total manufacturing overhead cost $ 602,000           The predetermined overhead rate is computed as follows:         Estimated total manufacturing overhead $ 602,000   ÷ Estimated total machine-hours 70,000  MHs      = Predetermined overhead rate $ 8.60  per MH    Painting Department: The estimated total manufacturing overhead cost in the Painting Department is computed as follows:               Y = $615,000 + $2.00 per DLH × 60,000 DLH          Estimated fixed manufacturing overhead $ 615,000       Estimated variable manufacturing overhead:      $2.00 per DLH × 60,000 DLHs 120,000            Estimated total manufacturing overhead cost $ 735,000            The predetermined overhead rate is computed as follows:         Estimated total manufacturing overhead $ 735,000     ÷ Estimated total DLHs 60,000    DLHs      = Predetermined overhead rate $ 12.25    per DLH    2.      Molding Department overhead applied:      110 machine-hours × $8.60 per machine-hour $946       Painting Department overhead applied:      84 direct labor-hours × $12.25 per DLH 1,029          Total overhead cost $1,975        3-b. Unit product cost for Job 205:      Total manufacturing cost $ 3,690       ÷ Number of units in the job 50    units   = Unit product cost $ 73.80    per unit    4.    Molding Painting   Manufacturing overhead cost incurred $ 570,000    $ 750,000      Manufacturing overhead cost applied:         65,000 machine-hours × $8.60 per MH 559,000         62,000 direct labor-hours × $12.25 per direct labor-hour 759,500         Underapplied (or overapplied) overhead $ 11,000    $ (9,500)