Garcia, Incorporated, uses a job-order costing system for its products, which pass from the Machining Department, to the Assembly Department, to finished-goods inventory. The Machining Department is heavily automated; in contrast, the Assembly Department performs a number of manual-assembly activities. The company applies manufacturing overhead using machine hours in the Machining Department and direct-labor cost in the Assembly Department. The following information relates to the year just ended: Items Budgeted manufacturing overhead Actual manufacturing overhead Budgeted direct-labor cost (based on practical capacity) Actual direct-labor cost Budgeted machine hours (based on practical capacity) Actual machine hours The data that follow pertain to job number 775, the only job in production at year-end. Assembly Department Items Direct material Direct labor Machine hours Machining Department $ 25,500 $ 27,800 370 $ 6,700 $ 58,500 150 Machining Department $ 4,000,000 Selling and administrative expense amounted to $2,500,000. 4,280,000 1,500,000 1,450,000 400,000 425,000 Assembly Department $ 3,080,000 3,040,000 5,600,000 5,780,000 100,000 110,000
Garcia, Incorporated, uses a job-order costing system for its products, which pass from the Machining Department, to the Assembly Department, to finished-goods inventory. The Machining Department is heavily automated; in contrast, the Assembly Department performs a number of manual-assembly activities. The company applies manufacturing overhead using machine hours in the Machining Department and direct-labor cost in the Assembly Department. The following information relates to the year just ended: Items Budgeted manufacturing overhead Actual manufacturing overhead Budgeted direct-labor cost (based on practical capacity) Actual direct-labor cost Budgeted machine hours (based on practical capacity) Actual machine hours The data that follow pertain to job number 775, the only job in production at year-end. Assembly Department Items Direct material Direct labor Machine hours Machining Department $ 25,500 $ 27,800 370 $ 6,700 $ 58,500 150 Machining Department $ 4,000,000 Selling and administrative expense amounted to $2,500,000. 4,280,000 1,500,000 1,450,000 400,000 425,000 Assembly Department $ 3,080,000 3,040,000 5,600,000 5,780,000 100,000 110,000
Garcia, Incorporated, uses a job-order costing system for its products, which pass from the Machining Department, to the Assembly Department, to finished-goods inventory. The Machining Department is heavily automated; in contrast, the Assembly Department performs a number of manual-assembly activities. The company applies manufacturing overhead using machine hours in the Machining Department and direct-labor cost in the Assembly Department. The following information relates to the year just ended: Items Budgeted manufacturing overhead Actual manufacturing overhead Budgeted direct-labor cost (based on practical capacity) Actual direct-labor cost Budgeted machine hours (based on practical capacity) Actual machine hours The data that follow pertain to job number 775, the only job in production at year-end. Assembly Department Items Direct material Direct labor Machine hours Machining Department $ 25,500 $ 27,800 370 $ 6,700 $ 58,500 150 Machining Department $ 4,000,000 Selling and administrative expense amounted to $2,500,000. 4,280,000 1,500,000 1,450,000 400,000 425,000 Assembly Department $ 3,080,000 3,040,000 5,600,000 5,780,000 100,000 110,000
Assuming the use of normal costing, determine the predetermined overhead rates used in the Machining Department and the Assembly Department.
Transcribed Image Text:Machining department
Assembly department
Predetermined overhead rate
per machine hour
% of direct-labor cost
Transcribed Image Text:Garcia, Incorporated, uses a job-order costing system for its products, which pass from the Machining Department, to the
Assembly Department, to finished-goods inventory. The Machining Department is heavily automated; in contrast, the
Assembly Department performs a number of manual-assembly activities. The company applies manufacturing overhead
using machine hours in the Machining Department and direct-labor cost in the Assembly Department. The following
information relates to the year just ended:
Items
Budgeted manufacturing overhead
Actual manufacturing overhead
Budgeted direct-labor cost (based on practical capacity)
Actual direct-labor cost
Budgeted machine hours (based on practical capacity)
Actual machine hours
The data that follow pertain to job number 775, the only job in production at year-end.
Assembly
Department
$ 6,700
$58,500
150
Machining
Department
$ 25,500
$ 27,800
370
Selling and administrative expense amounted to $2,500,000.
Machining
Department
$ 4,000,000
4,280,000
1,500,000
1,450,000
Items
Direct material
Direct labor
Machine hours
400,000
425,000
Assembly
Department
$ 3,080,000
3,040,000
5,600,000
5,780,000
100,000
110,000
Definition Definition Indirect costs incurred while producing goods or services. Overhead costs cannot be directly attributed to products or services. Overhead includes indirect material cost, indirect labor cost, rent, utilities expenses, and depreciation. Since these costs directly affect the profitability of a company, managing overhead becomes an important task for management.
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