Question

Smith Fabricating uses job costing and applies overhead using a normal costing system and uses direct labour cost as the allocation base. This period's estimated overhead cost is $100,000 and estimated direct labour cost of $50,000 and 2,500 direct labour hours. What is the total manufacturing cost of Job 201?
A. $1,500
B. $850
C. $950
D. $550

Answer 1

Answer: C. $950

Explanation:

Hello.

Your question was missing a few details so I threw them in. You'll find it in attachments.

To calculate the total Manufacturing costs for Job 201 we would need to calculate the overhead cost allocation rate first to find out how much Overhead to allocate to Job 201.

Using a normal costing system with direct labour cost as the allocation base,

Overhead allocation rate = (Overheads/Direct Labor Cost)*100

= (100,000/50,000)*100

=200%

Overhead allocation rate is 200% or 2x direct labor cost.

Now to calculate the total Manufacturing costs of Job 201,

Total manufacturing cost for Job 201 = Direct Material + Direct Labor + Manufacturing Overheads

= 350 + 200 + (200*2 for manufacturing overhead)

= 350 + 200 + 400

= $950

$950 is the total manufacturing cost for Job 201 making option C correct.