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3 April, 17:16

Mason Company has two manufacturing departments-Machining and Assembly. The company considers all of its manufacturing overhead costs to be fixed costs. It provided the following estimates at the beginning of the year as well as the following information with respect to Jobs A and B: Estimated Data Machining Assembly Total Manufacturing overhead $ 7,056,000 $ 441,000 $ 7,497,000 Direct labor hours 21,000 336,000 357,000 Machine hours 336,000 16,000 352,000 Job A Machining Assembly Total Direct labor hours 5 10 15 Machine hours 11 2 13 Job B Machining Assembly Total Direct labor hours 4 5 9 Machine hours 12 3 15

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  1. 3 April, 20:54
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    1. Manufacturing Overhead for Job A = $315; Manufacturing Overhead for Job B = $189

    2. Total Manufacturing Overhead Cost for Job A = $244.1; Total Manufacturing Overhead Cost for Job B = $258.55

    Explanation:

    First, we give clarity to the question

    Estimated Data Machining Assembly Total

    Manufacturing O/H $7,056,000 $441,000 $7,497,000

    Direct Labour Hrs 21,000 336,000 357,000

    Machine Hrs 336,000 16,000 352,000

    Job A

    DIrect Labour Hours 5 10 15

    Machine Hours 11 2 13

    Job B

    Direct Labour Hrs 4 5 9

    Machine Hrs 12 3 15

    1. If Mason Company uses a plantwide predetermined overhead rate with direct labor-hours as the allocation base, how much manufacturing overhead cost would be applied to Job A? Job B? (Round your answers to the nearest whole dollar amount.)

    2. Assume that Mason Company uses departmental predetermined overhead rates. The Machining Department is allocated based on machine-hours and the Assembly Department is allocated based on direct labor-hours. How much manufacturing overhead cost would be applied to Job A? Job B? (Round your intermediate calculations and final answers to 2 decimal places.)

    Solution:

    How Much Manufacturing Overhead cost would be applied to Job A and Job B

    Step 1 for Question 1

    Predetermined rate Plantwide = Total Manufacturing cost / Total Direct Labour

    = $7,497,000/357,000 = $21

    Step 2 for Question 1: Therefore, Manufacturing Overhead Cost is as follows

    Job A Manufacturing Overhead = Total Direct Labour hours for Job A x Plantwide rate

    = 15 x $21 = $315

    Job B Manufacturing Overhead = Total Direct Labour hours for Job B x Plantwide rate

    = 9 x $21 = $189

    Question 2: Calculate the Pre-determined Departmental Overhead rates

    Step 1. Machining Department = Manufacturing Cost for Machining / Machine hours

    = $7,056,000 / 336,000 = $21

    Step 2. Assembly Department = Manufacturing Overhead cost for Assembly/Machine Hours

    = $441,000/336,000 = $1.31

    Step 3. Manufacturing Overhead cost applied to Job A =

    Machining Department Cost = Machine hours for Job A x Machining Department Rate (determined in step 1)

    = 11 x $21 = $231

    and

    Assembly Department Cost Applied to Job A=Assembly hours for Job A x Assembly Cost determined in step 2 above

    =10 x $1.31 = $13.1

    Total Manufacturing Overhead Cost for Job A = $231 + $13.1 = $244.1

    Step 4. Manufacturing Overhead cost applied to Job B =

    Machining Department Cost = Machine hours for Job B x Machining Department Rate (determined in step 1)

    = 12 x $21 = $252

    and

    Assembly Department Cost Applied to Job A=Assembly hours for Job A x Assembly Cost determined in step 2 above

    =5 x $1.31 = $6.55

    Total Manufacturing Overhead Cost for Job B = $252 + $6.55 = $258.55
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