3) Job Order Costing

Chipman Corporation's budgeted factory overhead is $300,000. Budgeted direct labor cost is $500,000 at a rate of $25 per hour.

a) If factory overhead is to be applied based on direct labor cost, how much overhead will be applied to a job incurring $4,000 of direct labor cost? If actual overhead for the job is $2,500, is overhead over- or under-applied?

b) If factory overhead is to be applied based on direct labor hour, how much overhead will be applied to a job incurring 600 direct labor hours?

Hint: you need to calculate budgeted direct labor hour first