Thermos had just started to use departmental overhead rates to allocate indirect costs to control production costs. The company differentiated two departments: Preparation Department and Finishing Department. The company prepared the following production estimates for the two departments:

Manufacturing overhead is allocated on the basis of machine labor hours in the Preparation Department and on the basis of direct labor hours in the Finishing Department.

Requirements

1. Calculate the predetermined overhead rate for each department.

2. Calculate the total cost of Job T10.

3. If the actual machine hours in the Preparation Department totaled 6,100 hours, did overcosting or undercosting of manufacturing overhead occur?

Transcribed Image Text:

Preparation Department Finishing Department Machine hours. 6,000 5,000 Direct labor cost. $150,000 $250,000 ..... Direct labor hours.. Manufactured overhead. 18,750 25,000 S 30,000 $100,000 The accounting records for Job T10 reveal the following: Preparation Department Finishing Department Machine hours.. 200 50 Direct labor cost. $16,000 $18,000 1,800 $ 2,000 Direct labor hours.. 2,000 Raw materials $ 5,000 Preparation Department Finishing Department Machine hours. 6,000 5,000 Direct labor cost. $150,000 $250,000 ..... Direct labor hours.. Manufactured overhead. 18,750 25,000 S 30,000 $100,000 The accounting records for Job T10 reveal the following: Preparation Department Finishing Department Machine hours.. 200 50 Direct labor cost. $16,000 $18,000 1,800 $ 2,000 Direct labor hours.. 2,000 Raw materials $ 5,000

Answer rating: 100% (QA)

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