Question

Sunland Company thinks machine hours is the best activity base for its manufacturing overhead. The estimate of annual overhead costs for its jobs was $1850000. The company used 1000 hours of processing on Job No. B12 during the period and incurred overhead costs totaling $1900000. The budgeted machine hours for the year totaled 20000. How much overhead should be applied to Job No. B12

Answer 1

Answer:

Allocated MOH= $92,500

Explanation:

First, we need to calculate the predetermined overhead rate:

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

Predetermined manufacturing overhead rate= 1,850,000 / 20,000

Predetermined manufacturing overhead rate= $92.5 per hour

Now, we can allocate overhead to Job B12:

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

Allocated MOH= 92.5*1,000

Allocated MOH= $92,500