Question

Taveras Corporation is currently operating at 50% of its available manufacturing capacity. It uses a job-order costing system with a plantwide, predetermined overhead rate based on machine-hours. At the beginning of the year, the company made the following estimates:

Machine-hours required to support estimated production 240,000
Fixed manufacturing overhead cost 4,320,000
Variable manufacturing overhead cost per machine-hour 2.00
Required:
1. Compute the plantwide predetermined overhead rate.
2. During the year, Job P90 was started, completed, and sold to the customer for $4,000. The following information was available with respect to this job:
Direct materials $1,840
Direct labor cost $1,320
Machine-hours used 87
Determine the total cost of Job P90

Answer 1

The plantwide predetermined overhead rate for Taveras Corporation is $20 per machine-hour. Job P90's total cost, including direct materials, direct labor, and overhead, is $4,900.

Step-by-step explanation:

Calculation of Plantwide Predetermined Overhead Rate

The plantwide predetermined overhead rate is calculated by dividing the total estimated manufacturing overhead costs, both fixed and variable, by the estimated number of machine-hours. The total manufacturing overhead is the sum of the fixed costs and the total variable costs (variable cost per machine-hour multiplied by the estimated machine-hours). By using the provided estimates, we have:

Total Manufacturing Overhead Cost = Fixed Cost + (Variable Cost per Machine-Hour × Estimated Machine-Hours)

Total Manufacturing Overhead Cost = $4,320,000 + ($2.00 × 240,000)

Total Manufacturing Overhead Cost = $4,320,000 + $480,000

Total Manufacturing Overhead Cost = $4,800,000

Now we divide this total by the estimated machine-hours to get the predetermined overhead rate:

Plantwide Predetermined Overhead Rate = Total Manufacturing Overhead Cost / Estimated Machine-Hours

Plantwide Predetermined Overhead Rate = $4,800,000 / 240,000 Machine-Hours

Plantwide Predetermined Overhead Rate = $20 per Machine-Hour

Determination of Total Cost for Job P90

To determine the total cost of Job P90, we add the direct materials, direct labor, and applied manufacturing overhead based on the predetermined overhead rate and machine-hours used by Job P90.

Total Job Cost = Direct Materials + Direct Labor + (Predetermined Overhead Rate × Machine-Hours Used)

Total Job Cost = $1,840 + $1,320 + ($20 × 87)

Total Job Cost = $1,840 + $1,320 + $1,740

Total Job Cost = $4,900

The total cost of Job P90 is therefore $4,900.

Answer 2

Results are below.

Step-by-step explanation:

To calculate the predetermined manufacturing overhead rate we need to use the following formula:

Predetermined manufacturing overhead rate= total estimated overhead costs for the period/ total amount of allocation base

Predetermined manufacturing overhead rate= (4,320,000/240,000) + 2

Predetermined manufacturing overhead rate= $12.29 per machine hour

Job P90:

Direct materials $1,840

Direct labor cost $1,320

Machine-hours used 87

Total cost= 1,840 + 1,320 + (12.29*87)

Total cost= $4,229.23