Precision Instruments, Inc., uses job order costing and applies manufacturing

QUESTION

Precision Instruments, Inc., uses job order costing and applies manufacturing overhead to individual jobs by using predetermined overhead rates. In department A, overhead is applied on the basis of machine hours, and in Department B. on the basis of direct labor hours. At the beginning of the current year, management made the following budget estimates as a step toward determining the overhead application rates:Department A        Department BDirect labor $4,20,000 $3,00,000Manufacturing overhead $5,40,000 $4,12,500Machine-hours 18,000 1,900Direct labor hours 28,000 25,000Production of 4,000 techo meters(job no.399) was started in the middle of January and completed two weeks later. The cost record for this job show the following informationDepartment A Department BJob no.399 (4,000 units of product)Cost of materials used on job $6,800 $4,500Direct labor cost $8,100 $7,200Direct labor hours 540 600Machine-hour 100 100Instructionsa. Determine the overhead rate that should b used for each department in applying overhead costs to jobb. What is the total cost of job no.399 and what is the unit cost of the product manufactured on this productionc. Prepare the journal entries required to record the sale (on account) of 1,000 of the tachometers to SkiCrft Boats. The total sales price was $19,500d. Assume that actual overhead costs for the year were $517,000 in Department A and $424,400 in Department B. Actual machine-hours in Department A were 17,000 and actual direct labor hours in Department B were 26,000 during the year. On the basis of this information. Determine the over-or under applied overhead in each department for the year.

ANSWER:

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