Question

MNO Corporation uses a job-order costing system with a predetermined overhead rate based on direct labor-hours. The company based its predetermined overhead rate for the current year on the following data: Total estimated direct labor-hours 50,000 Total estimated fixed manufacturing overhead cost $285,000 Estimated variable manufacturing overhead per direct labor-hour $3.80 Recently, Job P123 was completed with the following characteristics: Total actual direct labor-hours 20 Direct materials $710 Direct labor cost $500 The amount of overhead applied to Job P123 is closest to _______________

Answer 1

Answer:

Allocated MOH= $174

Explanation:

Giving the following information:

Total estimated direct labor-hours 50,000 Total estimated fixed manufacturing overhead cost $285,000 Estimated variable manufacturing overhead per direct labor-hour $3.80

Job P123:

Total actual direct labor-hours 20

First, we need to calculate the estimated manufacturing overhead rate we need to use the following formula:

Estimated manufacturing overhead rate= total estimated overhead costs for the period/ total amount of allocation base

Estimated manufacturing overhead rate= (285,000/50,000) + 3.8

Estimated manufacturing overhead rate= $8.7 per direct labor hour.

Now, we can allocate overhead to Job P123:

Allocated MOH= Estimated manufacturing overhead rate* Actual amount of allocation base

Allocated MOH= 8.7*20= $174