Question

Mahon Corporation has two production departments, Casting and Customizing. The company uses a job-order costing system and computes a predetermined overhead rate in each production department. The Casting Department’s predetermined overhead rate is based on machine-hours and the Customizing Department’s predetermined overhead rate is based on direct labor-hours. At the beginning of the current year, the company had made the following estimates:
Casting CustomizingMachine-hours 15,600 13,600Direct labor-hours 5,600 6,800Total fixed manufacturing overhead cost $ 95,160 $ 58,480Variable manufacturing overhead per machine-hour $ 2.30 Variable manufacturing overhead per direct labor-hour $ 4.50During the current month the company started and finished Job T138. The following data were recorded for this job:Job T138: Casting CustomizingMachine-hours 100 30Direct labor-hours 12 80Required:
1. The amount of overhead applied in the Customizing Department to Job T138 is closest to __________. (Round your intermediate calculations to 2 decimal places.)O $264.00O $1,048.00O $528.00O $89,080.00

Answer 1

Answer:

Allocated overhead Customizing= $1,048

Explanation:

Giving the following information:

Customizing:

Direct labor hours= 6,800

Fixed overhead= 58,480

Estimated variable overhead rate= 4.5 per direct labor hour

T138:

Casting= 100 machine hours

Customizing=  80 direct labor hours

First, we need to calculate the estimated overhead rate for each department:

Estimated manufacturing overhead rate= total estimated overhead costs for the period/ total amount of allocation base

Customizing:

Estimated manufacturing overhead rate= (58,480/6,800) + 4.5= $13.1 per direct labor hour

Now, we can allocate overhead to Job T138:

Allocated overhead= (13.1*80)= $1,048