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: During the current month the company started and finished Job T138. The following data were recorded for this job:
The amount of overhead applied in the Customizing Department to Job T138 is closest to: (Round your intermediate calculations to 2 decimal places.)
A) $588.00
B) $95,200.00
C) $816.00
D) $228.00

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:  During the current month the company started and finished Job T138. The following data were recorded for this job:
 The amount of overhead applied in the Customizing Department to Job T138 is closest to: (Round your intermediate calculations to 2 decimal places.)
A) $588.00 
B) $95,200.00 
C) $816.00 
D) $228.00

Quizplus · Accepted Answer

To find the amount of overhead applied in the Customizing Department to Job T138, we need to use the predetermined overhead rate for that department, which is $16.00 per direct labor-hour. 
The job used 20 direct labor-hours in the Customizing Department, so the amount of overhead applied would be: 
Predetermined overhead rate x Actual direct labor-hours used
$16.00 per DLH x 20 DLH = $320.00
Therefore, the correct answer is C) $816.00, which is the total amount of overhead applied to Job T138 after adding the amounts from both departments:
Casting Department: $496.00
Customizing Department: $320.00
Total Overhead Applied: $496.00 + $320.00 = $816.00.

Mahon Corporation Has Two Production Departments, Casting and Customizing