Question

Boxer Industries worked on four jobs during its first year of operation: nos. 401, 402, 403, and 404. A review of job no. 403's cost record revealed direct material charges of $40,000 and total manufacturing costs of $50,000. If Boxer applies overhead at 150% of direct labor cost, the overhead applied to job no. 403 must have been:________.
A. $6,000.
B. $0.
C. $5,000.
D. $4,000.
E. $3,333

Answer 1

Answer:

Overhead= $6,000

Explanation:

Giving the following information:

Job 403:

Direct material=  $40,000

Total manufacturing costs = $50,000

Boxer applies overhead at 150% of direct labor cost.

Total manufacturing costs= direct material + direct labor + allocated overhead

50,000= 40,000 + (direct labor + allocated overhead)

(direct labor + allocated overhead)= $10,000

We know that overhead is 50% higher than direct labor. In 100%, direct labor would de 40% and overhead 60%.

direct labor=10,000*0.4= $4,000

Overhead= 10,000*0.6= $6,000