# Managerial Accounting: P17-4A Precision instruments, Inc., uses job order costing

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Managerial Accounting
Problem 17-4A Comprehensive job order problem
Precision instruments, Inc., uses job order costing and applies manufacturing overhead to individual jobs by using predetermined overhead rates. In department A, overhead is applied on the basis of machine-hours, and in department B, on the basis of direct labor hours. At the beginning of the current year, management made the following budget estimates as a step toward determining the overhead application rates:
Department A Department B
Direct labor 420,000 300,000
Machine-hours 18,000 1,900
Direct labor hours 28,000 25,000

Production of 4,000 tachometers (job 399) was started in the middle of January and completed two weeks later. The cost records for this job show the following information:
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

Instructions:
a. Determine the overhead rate that should be used for each department in applying overhead costs to job no. 399.
b. What is the total cost of job no. 399, and what is the unit cost of the product manufactured on this production order?
c. Prepare the journal entries required to record the sale (on account) of 1,000 of the tachometers to ski craft boats. The total sales price was \$19,500.
d. Assume that actual overhead costs for the year were \$517,000 in department A and \$424,400 in department B. Actual machine-hours in department A were 17,000, and actual direct labor hours in department B were 26,000 during the year. On the basis of this information, determine the over or underapplied overhead in each department for the year.