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 Smith (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 Smith?
c. Prepare the entries required to record the sale (on account) of the home to Cliff Smith. The sales price of the order was $602,000.
d. Determine the over- or underapplied overhead for each department at the end of the first quarter.

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Annual Estimates Direct labor cost. Direct labor hours ..... Manufacturing overhead Machine-hours Cutting Department $800,000 40,000 $600,000 30,000 Assembly Department $960,000 32,000 $480,000 15,000