Country products manufactures quilt racks. Pine is introduced in department 1, where the raw materials is cut and assembled. In department 2 completed racks are stained and packaged for shipment. The Department 1 applies overhead on the basis of machine hours; department 2 applies overhead on the basis of direct labor hours. The companies predetermined overhead rates are computed using the following information:

Sue contracted country products to produce 500 quilt racks at a special order. Power wanted the racks made from teak and to be made larger than the company's normal racks. Country products designed towers order as job #4.
During July, country products purchased $346,000 of raw material on account, of which $19,000 was teak. Requisitions were issued for $340,000 of raw materials, including all the teak. There were 285 direct labor hours worked ( at a rate of $11 per DLH) and 2,400 machine hours recorded in department
1; of these hours, 25 DLH and 320 MH were on the job#4. Department 2 had 1,430 DLH ( at a rate of $18 per DLH) and 180 MH; of these, 158 DLH and 20 MH were worked on job#4. Assume that all wages are paid in cash.
Job#4 was completed on July 28 and shipped to Sue, she was billed cost plus 20%.

Determine these:

1. What are the predetermined overhead rates for department 1 and 2?

2. Prepare journal entries for the July transactions.

3. What were the cost and selling price per unit of job#4? What were the cost per unit of the raw materials?

4. Assume that enough time had been issued in July for 20,000 quilt racks. The RM inventory manager is a friend of Sue and he conveniently forgot to trace the cost of the teak specifically to job#4. What would have been the effect of this error on the raw material cost, total cost, and selling price of each unit injob#4?

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Expected overhead Expected DLH's Expected MH's Department Department2 S465,000 4000 30,000 S465,000 4000 30,000