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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?

 
    

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