Problem 17.3A Job Order Costing: A Comprehensive Problem (LO17-1, LO17-2, LO17-3, LO17-4, LO17-5)

Georgia Woods, Inc., manufactures furniture to customers specifications and uses job order costing. A predetermined overhead rate is used in applying manufacturing overhead to individual jobs. In Department One, overhead is applied on the basis of machine-hours, and in Department Two, on the basis of direct labor hours. At the beginning of the current year, management made the following budget estimates to assist in determining the overhead application rate.

	Department One			Department Two
Direct labor cost	$	300,000		$	225,000
Direct labor hours		20,000			15,000
Manufacturing overhead	$	420,000		$	337,500
Machine-hours		12,000			7,500

Production of a batch of custom furniture ordered by City Furniture (job no. 58) was started early in the year and completed three weeks later on January 29. The records for this job show the following cost information.

	Department One				Department Two
Job order: City Furniture (job no. 58):
Direct materials cost	$	10,100			$	7,600
Direct labor cost	$	16,500			$	11,100
Direct labor hours		1,100				740
Machine-hours		750				500

Selected additional information for January is as follows.

	Department One				Department Two
Direct labor hoursmonth of January		1,600				1,200
Machine-hoursmonth of January		1,100				600
Manufacturing overhead incurred in January	$	39,010			$	26,540

Required:

a. Compute the predetermined overhead rate for each department.

b. What is the total cost of the furniture produced for City Furniture?

c. Prepare the entries required to record the sale (on account) of the furniture to City Furniture. The sales price of the order was $147,000.

d. Determine the over- or underapplied overhead for each department at the end of January.