Murtos Manufacturing Company uses a job order cost system in each of its three manufacturing departments. Manufacturing overhead is applied to jobs on the basis of direct labor cost in Department D, direct labor hours in Department E, and machine hours in Department K.
In establishing the predetermined overhead rates for 2011 the following estimates were made for the year.
| Department | |||
| D | E | K | |
| Manufacturing overhead | 1,050,000 | 1,500,000 | 840,000 |
| Direct labor costs | 1,500,000 | 1,250,000 | 450,000 |
| Direct labor hours | 100,000 | 125,000 | 40,000 |
| Machine hours | 400,000 | 500,000 | 120,000 |
During January, the job cost sheets showed the following costs and production data.
| Department | D | E | K |
| Direct materials used | 140,000 | 126,000 | 78,000 |
| Direct labor costs | 120,000 | 110,000 | 37,500 |
| Manufacturing overhead incurrect | 89,000 | 124,000 | 74,000 |
| Direct labor hours | 8,000 | 11,000 | 3,500 |
| Machine hours | 34,000 | 45,000 | 10,400 |
Instructions
a. Compute the predetermined overhead rate for each department.
Department A overhead is applied on direct labor cost
Department B overhead is applied on direct labor hours
Department C overhead is applied on machine hours
b. Compute the total manufacturing costs assigned to jobs in January in each department.
c. Compute the under- or overapplied overhead for each department at January 31.
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