JOB-ORDER COSTING

Alba Foundry in Boston uses a predetermined manufacturing overhead rate to allocate overhead to individual jobs based on themachine hours required. At the beginning of the year, the company expected to incur the following

Manufacturing overhead costs . . . . . . . .

$620,000

Direct labor cost . . . . . . . . . . . . . . . . . . . .

$1,450,000

Machine hours . . . . . . . . . . . . . . . . . . . . .

77,500

At the end of the year, the company had actually incurred the following:

Direct labor cost . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$1,250,000

Depreciation on manufacturing plant and

equipment . . . . . . . . . . . . . . . . . . . . . . . .

$475,000

Property taxes on plant . . . . . . . . . . . . . . . . . . . . . .

$21,000

Sales salaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$23,000

Delivery drivers' wages . . . . . . . . . . . . . . . . . . . . . .

$14,500

Plant janitors' wages . . . . . . . . . . . . . . . . . . . . . . . .

$9,500

Machine hours . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

55,000 hours

Requirements

1.

Compute the predetermined manufacturing overhead rate.

2.

How much manufacturing overhead was allocated to jobs during the year?

3

How much manufacturing overhead was incurred during the year?

Is manufacturing overhead underallocated or overallocated at the end of the year? By how much?

4.

Were the jobs overcosted or undercosted? By how much?