Cost Estimation, Estimating Overhead Rates, Job Costing, and Decision Making O'Henry Corporation manufactures special purpose portable structures (huts, mobile offices, and so on) for use at construction sites. It only builds to order (each unit is built to customer specifications). O'Henry uses a normal job costing system. Direct labor at O'Henry is paid $17 per hour, but the employees are not paid if they are not working on jobs. Manufacturing overhead is assigned to jobs by a predetermined rate on the basis of direct labor-hours. The company incurred manufacturing overhead costs during two recent years (adjusted for price- level changes using current prices and wage rates) as follows: Year 1 Year 2 Direct labor-hours worked Manufacturing overhead costs incurred 69,000 54,000 Employee benefts Power Heat and light.. Depreciation. Property taxes and insurance 810,000 540,000 522,000 138,000 656,250 . 1,982,500 ,982,500 751.250 $8,625,000 $7,560,000 . 1,035,000 690,000 552,000 138,000 716,250 751,250 E Total manufacturing overhead costs.... At the beginning of year 3, O'Henry has two jobs, which have not yet been delivered to customers. Job MC-270 was completed on December 27, year 2. It is scheduled to ship on January 7, year 3. Job MC-275 is still in progress. The predetermined rate in year 2 was $130 per direct labor-hour. Data on direct material costs and direct labor-hours for these jobs in year 2 follow: Job MC-270 Job MC-275 Direct material costs ....$270,000 $495,000 During year 3, O'Henry incurred the following direct material costs and direct labor-hours for all jobs worked in year 3, including the completion of Job MC-275: Direct material costs Direct labor-hours. $11,840,000 74,000 $9,120.000 overhead