Question

Max Company allocates overhead based on direct labor hours. It allocates overhead costs of $13,800 to two different jobs as follows: Job 1: (10 hours) = $6,900; Job 2: (10 hours) = $6,900 The production process for Job 2 was then automated. Now Job 2 requires only 2 hours of direct labor but 4 hours of mechanical processing. As a result, total overhead increases to $18,600. With the change in the production process for Job 2, the amount of overhead assigned to:

Answer 1

Answer:

Allocated MOH= $1,380

Explanation:

First, we need to calculate the predetermined allocation rate per direct labor hour:

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

6,900 = Estimated manufacturing overhead rate*10

Estimated manufacturing overhead rate= $690 per direct labor hour

Now, we can allocate overhead for Job 2:

Allocated MOH= 690*2

Allocated MOH= $1,380