John Company of Akron, Ohio has two manufacturing departments—Machining and Assembly. The company considers all of its...

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Accounting

John Company of Akron, Ohio has two manufacturingdepartments—Machining and Assembly. The company considers all ofits manufacturing overhead costs to be fixed costs. It provided thefollowing estimates at the beginning of the year as well as thefollowing information with respect to Jobs A and B:
Estimated Data
Machining
Assembly
Total
Manufacturing overhead
$500,000
$100,000
$600,000
Direct labor-hours
10,000
50,000
60,000
Machine-hours
50,000
5,000
55,000
Job A
Machining
Assembly
Total
Direct labor-hours
5
10
15
Machine-hours
11
2
13
Job B
Machining
Assembly
Total
Direct labor-hours
4
5
9
Machine-hours
12
3
15
Required
If John Company uses a plantwide predetermined overhead ratewith direct labor-hours as the allocation base, how muchmanufacturing overhead cost would be applied to Job A? Job B? Showyour work.
Assume that John Company uses departmental predeterminedoverhead rates. The Machining Department is allocated based onmachine-hours and the Assembly Department is allocated based ondirect labor-hour. How much manufacturing overhead cost would beapplied to Job A? Job B? Show your work.
If John Company multiplies its job costs by a markup percentageto establish selling prices, how might plantwide allocationadversely affect the company’s pricing decision?

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3.8 Ratings (463 Votes)

Solution A Pre determined overhead rate Estimated manufacturing overhead Estimated direct labor hours 600000 60000 10 per direct labor hour Manufacturing overhead cost applied to Job A See Answer

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Estimated Data	Machining	Assembly	Total
Manufacturing overhead	$500,000	$100,000	$600,000
Direct labor-hours	10,000	50,000	60,000
Machine-hours	50,000	5,000	55,000

Job A	Machining	Assembly	Total
Direct labor-hours	5	10	15
Machine-hours	11	2	13

Job B	Machining	Assembly	Total
Direct labor-hours	4	5	9
Machine-hours	12	3	15