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  • Jul 10, 2012, 02:13 PM
    MichelleEm
    Managerial Accounting
    Mabry Manufacturing Company 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 D, direct labor hours in Department E, and machine hours in Department K.
    In establishing the predetermined overhead rates for 2008 the following estimates were made for the year.



    Department


    D,E,K
    Manufacturing overhead $1,125,000 $1,650,000 $900,000
    Direct labor costs $1,500,000 $1,375,000 $495,000
    Direct labor hours 110,000 125,000 44,000
    Machine hours 440,000 550,000 120,000

    During January, the job cost sheets showed the following costs and production data.



    Department


    D,E, K
    Direct materials used $154,000 $138,600 $85,800
    Direct labor costs $132,000 $121,000 $41,250
    Manufacturing overhead incurred $97,900 $136,400 $81,400
    Direct labor hours 8,800 12,100 3,850
    Machine hours 37,400 49,500 10,400

    I do not understand how to find the over head applied for manufacturing cost/ The applied in the manufacturing Over Head section. My numbers were incorrect.
  • Jul 10, 2012, 07:31 PM
    paraclete
    Quote:

    Originally Posted by MichelleEm View Post
    Mabry Manufacturing Company 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 D, direct labor hours in Department E, and machine hours in Department K.
    In establishing the predetermined overhead rates for 2008 the following estimates were made for the year.



    Department


    D,E,K
    Manufacturing overhead $1,125,000 $1,650,000 $900,000
    Direct labor costs $1,500,000 $1,375,000 $495,000
    Direct labor hours 110,000 125,000 44,000
    Machine hours 440,000 550,000 120,000

    During January, the job cost sheets showed the following costs and production data.



    Department


    D,E, K
    Direct materials used $154,000 $138,600 $85,800
    Direct labor costs $132,000 $121,000 $41,250
    Manufacturing overhead incurred $97,900 $136,400 $81,400
    Direct labor hours 8,800 12,100 3,850
    Machine hours 37,400 49,500 10,400

    I do not understand how to find the over head applied for manufacturing cost/ The applied in the manufacturing Over Head section. my numbers were incorrect.

    it is simple enough; for each department you use the rate denominator to determine what the rate was set at i.e. 1125000/1500000 = 0.75 in the case of the labour cost method then in the month you would see that 0.75 x 132000 = 99000 and there is a variance of 1100

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