PROBLEM 2–24A Multiple Departments; Applying Overhead [ LO3 , LO5 , LO8 ]

High Desert Potteryworks makes a variety of pottery products that it sells to retailers such as Home Depot.

The company uses a job-order costing system in which predetermined overhead rates are used to apply manufacturing overhead cost to jobs. The predetermined overhead rate in the Molding Department is based on machine-hours, and the rate in the Painting Department is based on direct labor cost. At the beginning of the year, the company’s management made the following estimates:

Department Molding Painting Direct labor-hours ................................................ 12,000 60,000 Machine-hours ..................................................... 70,000 8,000 Direct materials cost ............................................ $510,000 $650,000 Direct labor cost ................................................... $130,000 $420,000 Manufacturing overhead cost .............................. $602,000 $735,000 Job 205 was started on August 1 and completed on August 10. The company’s cost records show the following information concerning the job:

Department Molding Painting Direct labor-hours ................................................ 30 85 Machine-hours ..................................................... 110 20 Materials placed into production .......................... $470 $332 Direct labor cost ................................................... $290 $680 Required:

1. Compute the predetermined overhead rate used during the year in the Molding Department. Compute the rate used in the Painting Department.

2. Compute the total overhead cost applied to Job 205.

3. What would be the total cost recorded for Job 205? If the job contained 50 units, what would be the unit product cost?

4. At the end of the year, the records of High Desert Potteryworks revealed the following actual cost and operating data for all jobs worked on during the year:

Department Molding Painting Direct labor-hours ................................................ 10,000 62,000 Machine-hours ..................................................... 65,000 9,000 Direct materials cost ............................................ $430,000 $680,000 Direct labor cost ................................................... $108,000 $436,000 Manufacturing overhead cost .............................. $570,000 $750,000 What was the amount of underapplied or overapplied overhead in each department at the end of the year?