WoodGrain Technology makes home office furniture from fine hardwoods. The company uses a job-order costing system and predetermined overhead rates to apply manufacturing overhead cost to jobs. The predetermined overhead rate in the Preparation Department is based on machine-hours, and the rate in the Fabrication Department is based on direct materials cost. At the beginning of the year, the company’s management made the following estimates for the year:
Department
Preparation Fabrication
Machine-hours . . . . . . . . . . . . . . . . . 80,000 21,000
Direct labour-hours. . . . . . . . . . . . . . 35,000 65,000
Direct materials cost. . . . . . . . . . . . . $190,000 $400,000
Direct labour cost . . . . . . . . . . . . . . . 280,000 530,000
Manufacturing overhead cost . . . . . . 416,000 720,000
Job 127 was started on April 1 and completed on May 12. The company’s cost records show the following information on the job:
Department
Preparation Fabrication
Machine-hours . . . . . . . . . . . . . . . . . 350 70
Direct labour-hours. . . . . . . . . . . . . . 80 130
Direct materials cost. . . . . . . . . . . . . $940 $1,200
Direct labour cost . . . . . . . . . . . . . . . 710 980
Required:
1. Compute the predetermined overhead rate used during the year in the Preparation Department. Compute the rate used in the Fabrication Department.
2. Compute the total overhead cost applied to job 127.
3. What would be the total cost recorded for job 127? If the job contained 25 units, what would be the unit product cost?
4. At the end of the year, the records of WoodGrain Technology revealed the following actual cost and operating data for all jobs worked on during the year:
Department
Preparation Fabrication
Machine-hours . . . . . . . . . . . . . . . . . 73,000 24,000
Direct labour-hours. . . . . . . . . . . . . . 30,000 68,000
Direct materials cost. . . . . . . . . . . . . $165,000 $420,000
Manufacturing overhead cost . . . . . . 390,000 740,000
What was the amount of underapplied or overapplied overhead in each department at the end of the year?
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