Precision instruments uses job order costing and apples manufacuring overhead to individual jobs by using predetermined overhead rates. In dept A, overhead is applied on the basis of machine hours and Dept B on thebasis of direct labor hous. At the beginning of the yea, managementmade th efollowing budget estimats as a step toward determining the overhead application rates. Dept A Dept B Direct Labor $420,000 $300000 Manufacturing overhead $540,000 $412,500 Machine hours 18000 1900 Direct labor hours 28000 25000 Production of 4000 tachometers (job 399) was started in the middle of January and completed 2 weeks later. Thecost records for this job show the following information Dept A Dept B Job 399 4000 units of product Cost of materials $6800 $4500 Direct labor costs 8100 7200 Direct labor hours 540 600 Machine hours 250 100 a. determine the overhead rate that should be used for each department in applying overhead costs to job 399 b. What is the total cost of job 399 and what is the unit cost of the product manufacuted on this production order c. Prepare the journal entries required to record the sale (on account) of 1000 of the tachometers to SkiCraft Boats. The total sales price was $19,500 d. Assume the actual overhead cosest fo rthe year were $517,000 in dept A and $424,400 in dept B. Actual machine hours in Dept A were 17,000 and actual direct labor hours in Dept B were 26,000 during the year. On the basis of this information, determine the over or underapplied overhead in each department

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter4: Activity-based Costing

Section: Chapter Questions

Problem 30P: Primera Company produces two products and uses a predetermined overhead rate to apply overhead....

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Precision instruments uses job order costing and apples manufacuring overhead to individual jobs by using predetermined overhead rates. In dept A, overhead is applied on the basis of machine hours and Dept B on thebasis of direct labor hous. At the beginning of the yea, managementmade th efollowing budget estimats as a step toward determining the overhead application rates.

	Dept A	Dept B
Direct Labor	$420,000	$300000
Manufacturing overhead	$540,000	$412,500
Machine hours	18000	1900
Direct labor hours	28000	25000

Production of 4000 tachometers (job 399) was started in the middle of January and completed 2 weeks later. Thecost records for this job show the following information

	Dept A	Dept B
Job 399 4000 units of product
Cost of materials	$6800	$4500
Direct labor costs	8100	7200
Direct labor hours	540	600
Machine hours	250	100

a. determine the overhead rate that should be used for each department in applying overhead costs to job 399

b. What is the total cost of job 399 and what is the unit cost of the product manufacuted on this production order

c. Prepare the journal entries required to record the sale (on account) of 1000 of the tachometers to SkiCraft Boats. The total sales price was $19,500

d. Assume the actual overhead cosest fo rthe year were $517,000 in dept A and $424,400 in dept B. Actual machine hours in Dept A were 17,000 and actual direct labor hours in Dept B were 26,000 during the year. On the basis of this information, determine the over or underapplied overhead in each department

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