Lincoln Estates manufactures log homes to customers specifications and uses job order costing. A predetermined overhead rate

Lincoln Estates manufactures log homes to customers’ specifications and uses job order costing. A predetermined overhead rate is used in applying manufacturing overhead to individual jobs. In the Cutting Department, overhead is applied on the basis of machine hours. In the Assembly Department, overhead is applied on the basis of direct labor hours. At the beginning of the current year, management made the following estimates to assist in determining the overhead application rates:

Production of a home ordered by Cliff Newton (job no. 80) was started early in the year and completed at the end of the first quarter, on March 31. The records for this job show the following cost information:

Selected additional information for the first quarter is as follows:

Instructions
a. Compute the predetermined overhead rate for each department.
b. What is the total cost of the home produced for Cliff Newton?
c. Prepare the entries required to record the sale (on account) of the home to Cliff Newton. The sales price of the order was $602,000.
d. Determine the over- or underapplied overhead for each department at the end of the firstquarter.

Transcribed Image Text:

Cutting Assembly Annual Estimates Direct labor cost Direct labor hours Manufacturing overhead. Machine-hours Department Department $800,000 $960,000 32,000 $600,000 $480,000 15,000 40,000 30,000 Cutting Assembly Department Department Job order for Cliff Newton (job no. 80): $100,000 $150,000 .$10,000 $108,000 3,600 300 Direct labor cost Direct labor hours Machine-hours 500 400 Cutting Assembly Department Department Direct labor hours-first quarter Machine-hours-first quarter Manufacturing overhead incurred in first quarter 6,000 3,000 $142,000 $87,000 8,000 7,000