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    Predetermined Overhead Rate & Total Cost

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    Tanner Bay Inc. has two departments, Assembly and Packaging. The company uses a job order costing system and computes a predetermined overhead rate in each department. The Assembly Department bases its rate on machine hours and the Packaging Department bases its rate on direct labor hours. At the beginning of the year, the company made the following estimates:

    Assembly Packaging
    Direct labor hours 3,000 4,000
    Machine hours 8,500 9,900
    Manufacturing Overhead cost $144,500 $172,000
    Direct labor cost $89,200 $101,000

    Assume also the following actual data on Job #503 which was started and completed during the year:

    Assembly Packaging
    Direct labor hours 23 37
    Machine hours 109 142
    Materials requisitioned $8,787 $6,566
    Direct labor cost $2,100 $1,990

    What is the predetermined overhead rate to be used in each department?

    XYZ Corporation has two departments, Machining and Assembly. The company uses a job order costing system and computes a predetermined overhead rate in each department. The Machining Department bases its rate on machine hours and the assembly Department bases its rate on direct labor cost. At the beginning of the year, the company made the following estimates:

    Machining Assembly
    Direct labor hours 11,000 9,000
    Machine hours 23,000 14,000
    Manufacturing Overhead cost $368,000 $312,000
    Direct labor cost $102,100 $78,000

    Assume also the following actual data on Job #219 which was started and completed during the year:

    Machining Assembly
    Direct labor hours 104 98
    Machine hours 189 290
    Materials requisitioned $33,400 $44,200
    Direct labor cost $4,200 $9,600

    What is the total cost assigned to job #219?

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    Solution Preview

    Tanner Bay

    Assembly Predetermined Overhead Rate = 144500/8500 = $17
    Packaging Predetermined Overhead Rate = 172000/4000 = $43

    XYZ Corporation

    Assembly ...

    Solution Summary

    The solution provides an example to how predetermined overhead rate and total cost if calculated.

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