Nitro Products uses a job costing system with two direct cost categories (direct material and direct labor) and one manufacturing overhead cost. Nitro allocates manufacturing overhead costs using direct labor costs. Nitro provides the following information:

Direct materials Direct Labors Manufacturing overhead

Estimation 2020 $2,000,000 $1,500,000 $2,700,000

Actual 2020 $1,900,000 $1,450,000 $2,755,000

Required: a) Compute the actual and predetermine overhead rates for 2020.

(5 marks) b) During March, the job-cost record for Job 626 contained the following

information: Direct materials $40,000 Direct Labor $30,000 Compute total cost of Job 626 using:

1. (i) Actual overhead rate

2. (ii) Predetermined overhead rate

(5 marks)

(5 marks) c) At the end 2020, compute the under/over applied manufacturing overhead

cost.

(4 marks) d) Why might managers at Nitro Products prefer to use predetermine cost

compare to actual?

**END OF QUESTION PAPER**

(6 marks)