O'Leary 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'Leary uses a normal job costing system. Direct labor at O'Leary is paid $25 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 2 55,600 Year 1 Direct labor-hours worked 68,600 Manufacturing overhead costs incurred Indirect labor $2,824,000 Employee benefits 1,029,000 Supplies 686,000 Power 643,000 Heat and light 141,200 Supervision 780,890 Depreciation 2,030,500 Property taxes and insurance 783,410 Total manufacturing overhead costs $8,918,000 $2,224,000 834,000 556,000 538,000 141,200 661,050 2,030,500 799,250 $7,784,000 At the beginning of year 3, O'Leary 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. For the purpose of computing the predetermined overhead rate, O'Leary uses the previous year's actual overhead rate. Data on direct material costs and direct labor- hours for these jobs in year 2 follow. Direct material costs Direct labor-hours Job MC-270 $271,600 2,580 hours Job MC-275 $496,600 3,280 hours During year 3, O'Leary 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 Actual manufacturing overhead $11,841,600 75,600 $ 9,504,000 O'Leary 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'Leary uses a normal job costing system. Direct labor at O'Leary is paid $25 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 2 55,600 Year 1 Direct labor-hours worked 68,600 Manufacturing overhead costs incurred Indirect labor $2,824,000 Employee benefits 1,029,000 Supplies 686,000 Power 643,000 Heat and light 141,200 Supervision 780,890 Depreciation 2,030,500 Property taxes and insurance 783,410 Total manufacturing overhead costs $8,918,000 $2,224,000 834,000 556,000 538,000 141,200 661,050 2,030,500 799,250 $7,784,000 At the beginning of year 3, O'Leary 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. For the purpose of computing the predetermined overhead rate, O'Leary uses the previous year's actual overhead rate. Data on direct material costs and direct labor- hours for these jobs in year 2 follow. Direct material costs Direct labor-hours Job MC-270 $271,600 2,580 hours Job MC-275 $496,600 3,280 hours During year 3, O'Leary 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 Actual manufacturing overhead $11,841,600 75,600 $ 9,504,000
