Stoke Corporation has two production departments, Forming and Assembly. The company uses a job-order costing system and computes a predetermined overhead rate in each production department. The Forming Department's predetermined overhead rate is based on machine-hours and the Assembly 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 A460. The following data were recorded for this job:

-The amount of overhead applied in the Forming Department to Job A460 is closest to:
A) $184,000.00
B) $184.00
C) $736.00
D) $664.00

Question

Stoke Corporation has two production departments, Forming and Assembly. The company uses a job-order costing system and computes a predetermined overhead rate in each production department. The Forming Department's predetermined overhead rate is based on machine-hours and the Assembly 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 A460. The following data were recorded for this job:
 
-The amount of overhead applied in the Forming Department to Job A460 is closest to:
A) $184,000.00 
B) $184.00 
C) $736.00 
D) $664.00

Quizplus · Accepted Answer

Forming Department overhead cost = Fixed manufacturing overhead cost + (Variable overhead cost per machine-hour × Total machine-hours in the department)
= $138,000 + ($2.30 per machine-hour × 20,000 machine-hours)
= $138,000 +$46,000 = $184,000
Predetermined overhead rate = Estimated total manufacturing overhead cost ÷ Estimated total amount of the allocation base incurred = $184,000 ÷ 20,000 machine-hours = $9.20 per machine-hour
Overhead applied to a particular job = Predetermined overhead rate × Amount of the allocation base incurred by the job = $9.20 per machine-hour × 80 machine-hours = $736

Stoke Corporation Has Two Production Departments, Forming and Assembly