Dickson Company: An Example Using Multiple Predetermined Overhead Rates

Step $1$: Calculate the estimated total manufacturing overhead cost for each department.

Milling Department Overhead Cost $($Y$)=$ $$390,000+($$$2\mathrm{.}00$ per MH $\backslash$times $60,000$ MHs$)$

$=$ $$390,000+$ $$120,000$

$=$ $$510,000$

Assembly Department Overhead Cost $($Y$)=$ $$500,000+($$$3\mathrm{.}75$ per DLH $\backslash$times $80,000$ DLHs$)$

$=$ $$500,000+$ $$300,000$

$=$ $$800,000$

Step $2$: Calculate the predetermined overhead rate in each department.

Milling Department Overhead Rate $=$ $$510,000/60,000$ machine$-$hours

$=$ $$8\mathrm{.}50$ per machine$-$hour

Assembly Department Overhead Rate $=$ $$800,000/80,000$ direct labor$-$hours

$=$ $$10\mathrm{.}00$ per direct labor$-$hour

Step $3$: Calculate the amount of overhead applied from both departments to Job $407.$

Milling Department: Overhead Applied to Job $407$

$=$ $$8\mathrm{.}50$ per MH $\backslash$times $90$ MHs

$=$ $$765$

Assembly Department: Overhead Applied to Job $407$

$=$ $$10\mathrm{.}00$ per DLH $\backslash$times $20$ DLHs

$=$ $$200$

Step $4$: Calculate the total job cost for Job $407.$

Milling Assembly Total

Direct materials $ $800$ $ $370$ $ $1,170$

Direct labor $ $70$ $ $280350$

Manufacturing overhead applied $ $765$ $ $200965$

Total cost of Job $407$ $ $2,485$

Step $5$: Calculate the selling price for Job $407.$

Total cost of Job $407$ $ $2,485\mathrm{.}00$

Markup $($$$2,485\backslash$times $75\%)1,863\mathrm{.}75$

Selling price of Job $407$ $ $4,348\mathrm{.}75$