Chapter 17.

4 A
Department A Department B
Direct labor ………………………………………………………………………. $ 420,000 $ 300,000
Manufacturing overhead ………………………………………………….. 540,000 412,500
Machine-hours …………………………………………………………………. 18,000 1,900
Direct labor hours …………………………………………………………….. 28,000 25,000

Cost record for production of 4,000 tachometer (job no. 399) as follows:
Department A Department B
Job no. 399 (4,000 units of product):
Cost of materials used on job ………………………………………. $ 6.800 $ 4,500
Direct labor cost …………………………………………………………… 8,100 7,200
Direct labor hours ………………………………………………………… 540 600
Machine-hours …………………………………………………………….. 250 100

a. Overhead rate of job no. 399

Overhead rate for department A = manufacturing overhead A / Machine-hours A
= $ 540,000 / $ 18,000
= $ 30

Overhead rate for department B = manufacturing overhead B / Direct labor hours B

= $ 412,500 / $ 25,000
= $ 16.50

b. Total cost of job no. 399 and cost per unit

Manufacturing overhead department A = Overhead rate x Machine-hours required for job no. 399
= $ 30 x 250
= $ 7,500
Manufacturing overhead department B = Overhead rate x Direct labor -hours required for job no. 399
= $ 16.5 x 600
= $ 9,900

Total cost for job no. 399:

Department A Department B Total
Cost of materials used on job $ 6.800 $ 4,500 $ 11,300
Direct labor cost 8,100 7,200 15,300
Manufacturing overhead 7,500 9,900 17,400
Total cost 22,400 21,600 44,000

Cost per unit = Total cost / number of unit

= 44,000 / 4,000
= $ 11 per tachometer
c. Journal entries required to record the sale (on account) of 1,000 of the tachometers to SkiCraft
Boats. The total sales price was $19,500
Account receivable ………………………………………………………. 19,500
Sales …………………………………………………….……………………… 19,500
Sold 1,000 of tachometers to SkiCraft

d. Determining the over or under applied overhead in each department

Manufacturing overhead applied to jobs in Department A
= Actual machine hours in Department A x Overhead rate for department A
= 17,000 x $ 30
= $ 510,000

Manufacturing overhead applied to jobs in Department B

= Actual labor hours in Department B x Overhead rate for department B
= 26,000 x $ 16.5
= $ 429,000

Details Department A Department B

Actual manufacturing overhead for January $ 517,000 $ 424,400
Less: Manufacturing overhead applied to jobs $ 510,000 $ 429,000
Over or under applied overhead $ 7,000 - $ 4,600

Refer to table above, so Under applied overhead of Department A is $ 7,000; meanwhile over
applied overhead of Department B is $ 4,600.