Question

The company applies overhead cost to jobs on the basis of direct labor-hours. For the current year, the company’s predetermined overhead rate of $14.25 per direct labor-hour was based on a cost formula that estimated $570,000 of total manufacturing overhead for an estimated activity level of 40,000 direct labor-hours. The following transactions were recorded for the year:
Raw materials were purchased on account, $634,000.
Raw materials use in production, $598,400. All of of the raw materials were used as direct materials.
The following costs were accrued for employee services: direct labor, $520,000; indirect labor, $150,000; selling and administrative salaries, $337,000.
Incurred various selling and administrative expenses (e.g., advertising, sales travel costs, and finished goods warehousing), $461,000.
Incurred various manufacturing overhead costs (e.g., depreciation, insurance, and utilities), $420,000.
Manufacturing overhead cost was applied to production. The company actually worked 41,000 direct labor-hours on all jobs during the year.
Jobs costing $1,645,750 to manufacture according to their job cost sheets were completed during the year.
Jobs were sold on account to customers during the year for a total of $3,360,000. The jobs cost $1,655,750 to manufacture according to their job cost sheets.
What is the total manufacturing cost added to Work in Process during the year?

Answer 1

Answer:

$1,702,650

Explanation:

The computation of the total manufacturing cost added to work in process is shown below:

Total manufacturing cost added to work in process

= Direct Materials + Direct Labor + Manufacturing Overhead applied

where,

Direct material $598,400

Direct labor is $520,000

And, the manufacturing overhead applied is

= Actual direct labor hours × predetermined overhead rate

= 41,000 hours × $14.25

= $584,250

So, the total manufacturing cost is

= $598,400 + $520,000 + $584,250

= $1,702,650

We simply applied the above formula