Question

Moran Company uses a job order cost system and has established a predetermined overhead application rate for the current year of 150% of direct labor cost, based on budgeted overhead of $900,000 and budgeted direct labor cost of $600,000. Job no. 1 was charged with direct materials of $36,000 and with overhead of $27,000. What is the total cost of job no. 1?

Answer 1

Answer:

The aggregate cost of the Job No. 1 amounts to $81,000

Explanation:

The aggregate cost of the Job No. 1 is computed as:

Aggregate cost = Direct material cost + Overhead cost + Direct labor cost

where

Direct material cost amounts to $36,000

Overhead cost amounts to $27,000

The Direct labor cost is computed as:

150% of  Direct labor cost = Pre-determined overhead are

So,

Direct labor cost = $27,000 / 150%

Direct labor cost = $18,000

Putting the values above:

Aggregate cost = $18,000 + $36,000 + $27,000

Aggregate cost = $81,000