Mr. J. G. Pigg, III is the sole owner of a brick company that manufactures custom bricks used in upscale homes. No two customers have the same type of bricks. The bricks go through three processes: mixing, shaping, and firing. The company uses a job order cost system and computes a predetermined overhead rate in each department. The mixing department bases its rate on direct materials, the shaping department bases its rate on machine hours, and the firing department bases its rate on direct labor hours. At the beginning of the year, the company made the following estimates:
Direct labor hours
Machine hours
Direct materials
Manufacturing overhead
Department
Mixing
Shaping
Firing
80,000
45,000
60,000
30,000
70,000
21,000
\$300,000
\$ 40.000
\$15,000
\$150,000
\$140,000
\$75,000
a. Compute the predetermined overhead rate to be used in each department during the upcoming year.
b. Assume the overhead rates that you computed in a. above are in effect. Compute the total overhead cost to be assigned to Dr. Snout's order-Job #5417, assuming the following data:
Direct labor hours
Machine hours
Direct materials
Department
Mixing
Shaping
Firing
300
80
92
80
120
120
\$6,000
\$120
\$300
c. If actual overhead incurred totaled \$3,500, compute the amount of over- or underapplied manufacturing overhead.
