1 answer

Panther Corporation has two production departments, Purple and Gold. The company uses a job-order costing system...

Question:

Panther Corporation has two production departments, Purple and Gold. The company uses a job-order costing system and computes a predetermined overhead rate in each production department. The Purple Department's predetermined overhead rate is based on machine-hours and the Gold 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:
PurpleGold
Machine-hours12,00015,000
Direct labor-hours2,0007,000
Total fixed manufacturing overhead cost$138,000$58,100
Variable manufacturing overhead per machine-hour$2.3
Variable manufacturing overhead per direct labor-hour$3
During the current month the company started and finished Job A460. The following data were recorded for this job:
Job A460:PurpleGold
Machine-hours8010
Direct labor-hours3050
The amount of overhead applied in the Purple Department to Job A460 is closest to:

Answers

Facts of the Question:

Budgeted data:

Purple

Gold

Machine-hours

             12,000

           15,000

Direct Labor-hours

                2,000

             7,000

Total Fixed Manufacturing overhead cost

$        138,000

$        58,100

Actual Data for Job A460:

Job A460

Purple

Gold

Machine-hours

                      80

                   10

Direct Labor-hours

                      30

                   50

Answer)

Calculation of Overhead applied in Purple Department to Job A460

Total overhead cost applied in purple department to Job A460 = (Total fixed manufacturing overhead of Job A460 in purple department) + (Total Variable manufacturing overhead of Job A460 in purple department)

                                                                                              = (Predetermined fixed overhead rate per machine hour X number of machine hours worked on Job A460 in purple department) + (Variable overhead rate per machine hour X number of machine hours worked on Job A460 in purple department)

                                                                             = ($ 11.50 per machine hour X 80 machine hours) + ($ 2.30 per machine hour X $ 80 machine hours)

                                                                              = $ 1,104

Therefore overhead applied in Purple department to Job A460 is $ 1,104.

Working Note:

Calculation of predetermined fixed overhead rate in purple department (based on machine hours)

Predetermined fixed overhead rate = Total estimated fixed manufacturing overhead cost in purple department/ Total Budgeted machine hours in purple department

                                                                         = $ 138,000/ 12,000 machine hours

                                                                          = $ 11.50 per machine hour

.

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