Vanliere Corporation has two production departments, Machining and Finishing. The company uses a job-order costing system and computes a predetermined overhead rate in each production department. The Machining Department's predetermined overhead rate is based on machine-hours and the Finishing 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 A803. The following data were recorded for this job:

-The amount of overhead applied in the Machining Department to Job A803 is closest to:
A) $828.00
B) $792.00
C) $171.00
D) $174,800.00

Question

Vanliere Corporation has two production departments, Machining and Finishing. The company uses a job-order costing system and computes a predetermined overhead rate in each production department. The Machining Department's predetermined overhead rate is based on machine-hours and the Finishing 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 A803. The following data were recorded for this job:
 
-The amount of overhead applied in the Machining Department to Job A803 is closest to:
A) $828.00 
B) $792.00 
C) $171.00 
D) $174,800.00

Quizplus · Accepted Answer

Machining Department overhead cost = Fixed manufacturing overhead cost + (Variable overhead cost per machine-hour × Total machine-hours in the department)
= $138,700 + ($1.90 per machine-hour × 19,000 machine-hours)
= $138,700 +$36,100 = $174,800
Predetermined overhead rate = Estimated total manufacturing overhead cost ÷ Estimated total amount of the allocation base incurred = $174,800 ÷ 19,000 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 × 90 machine-hours = $828

Vanliere Corporation Has Two Production Departments, Machining and Finishing