Exercise 2-17 (Algo) Plantwide and Departmental Predetermined Overhead Rates; Job Costs [LO2-1, LO2-2, LO2-3, LO2-4]

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Delph Company uses job-order costing with a plantwide predetermined overhead rate based on machine-hours. At the beginning of the year, the company estimated that 55,000 machine-hours would be required for the period’s estimated level of production. It also estimated $1,020,000 of fixed manufacturing overhead cost for the coming period and variable manufacturing overhead of $5.00 per machine-hour.

Because Delph has two manufacturing departments—Molding and Fabrication—it is considering replacing its plantwide overhead rate with departmental rates that would also be based on machine-hours. The company gathered the following information to enable calculating departmental overhead rates:

MoldingFabricationTotalMachine-hours

21,000

34,000

55,000

Fixed manufacturing overhead cost

$ 780,000

$ 240,000

$ 1,020,000

Variable manufacturing overhead cost per machine-hour

$ 5.00

$ 2.00

During the year, the company had no beginning or ending inventories and it started, completed, and sold only two jobs—Job D-70 and Job C-200. It provided the following information related to those two jobs:

Job D-70MoldingFabricationTotalDirect materials cost

$ 370,000

$ 320,000

$ 690,000

Direct labor cost

$ 220,000

$ 120,000

$ 340,000

Machine-hours

17,000

4,000

21,000

Job C-200MoldingFabricationTotalDirect materials cost

$ 280,000

$ 260,000

$ 540,000

Direct labor cost

$ 120,000

$ 260,000

$ 380,000

Machine-hours

4,000

30,000

34,000

Delph had no underapplied or overapplied manufacturing overhead during the year.

Exercise 2-17 (Algo) Part 2

Required:

2. Assume Delph uses departmental predetermined overhead rates based on machine-hours.

Compute the departmental predetermined overhead rates.