Question

Lancelot Manufacturing is a small textile manufacturer using machineminushours as the single indirectminuscost rate to allocate manufacturing overhead costs to the various jobs contracted during the year. The following estimates are provided for the coming year for the company and for the Case High School band jacket job. Company Case High School Job Direct materials $ 47 comma 000 $ 2 comma 200 Direct labor $ 25 comma 000 $ 500 Manufacturing overhead costs $ 36 comma 000 Machineminushours 90 comma 000 mh 900 mh What amount of manufacturing overhead costs will be allocated to this​ job? A. $ 360 B. $ 1 comma 080 C. $ 220 D. $ 610

Answer 1

Answer:

Overhead absorption rate = Budgeted overhead

                                              Budgeted machine hours

                                            = $36,000/90,000 hrs

                                           = $0.4 per machine hour

The amount of manufacturing overhead to be allocated to the job

= $0.4 x 900 machine hours

= $360

Explanation:

There is need to calculate the overhead absorption rate which is budgeted manufacturing overhead divided by budgeted activity level.

Then, we will multiply the overhead absorption rate by the actual machine hours of 900 hours.