Question
Money Manufacturing uses job costing and applies overhead via a normal costing system using direct labor hours as the allocation base. The estimated overhead cost
Money Manufacturing uses job costing and applies overhead via a normal costing system using direct labor hours as the allocation base. The estimated overhead cost for year 2 is $1,620,000. Also for year 2, the estimated direct labor cost is $1,080,000 and estimated direct labor hours are 60,000. The year 2 actual overhead cost was $2,190,000; while actual direct labor cost was $1,368,750, and actual direct labor hours were 75,000.
Using the information provided, perform the six tasks below in allocating overhead as required using a simple resource driver.
Note: Enter all values as whole numbers (no cents).
Direct | Direct | Direct | |
---|---|---|---|
Materials | Labor Cost | Labor Hours | |
Job 1 | $ 20,000 | $7,600 | 400 |
Job 2 | 18,360 | 6,120 | 360 |
Job 3 | 23,400 | 9,000 | 500 |
Task 1: | What is Money's predetermined overhead rate for Year 2? |
Task 2: | If the predetermined overhead rate was set at $30 per direct labor hour for year 2, what is the total manufacturing cost of Job 2? |
Task 3: | If the predetermined overhead rate was $25 per direct labor hour in year 2, how much manufacturing overhead cost was applied to work in process in year 2? |
Task 4: | If the predetermined overhead rate was $25 per direct labor hour in year 2, was manufacturing overhead overapplied or underapplied in year 2? |
| |
Task 5: | If the predetermined overhead rate was $27 per direct labor hour in year 2 and Money wanted to earn a profit of $25,000 on Job 1, what should the selling price of Job 1 be? | ||
Task 6: | If Money decided to use direct labor cost as the allocation basis for overhead, what would the predetermined overhead percentage have been? | ||
Step by Step Solution
3.44 Rating (154 Votes )
There are 3 Steps involved in it
Step: 1
Task 1 To calculate the predetermined overhead rate for Year 2 we use the formula Predetermined Overhead Rate Estimated Overhead Cost Estimated Direct ...Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started