Question

Southern Rim Parts estimates its manufacturing overhead to be $495,000 and its direct labor costs to be $900,000 for year 1. The first three jobs that Southern Rim worked on had actual direct labor costs of $20,000 for Job 301, $30,000 for Job 302, and $40,000 for Job 303. For the year, actual manufacturing overhead was $479,000 and total direct labor cost was $850,000. Manufacturing overhead is applied to jobs on the basis of direct labor costs using predetermined rates. How much overhead was assigned to each of the three jobs, 301, 302, and 303?

Answer 1

Answer:

Job 301    $   11,000

Job 302   $  16,500

Job 303   $ 22,000

Explanation:

$\frac{Cost\: Of \:Manufacturing \:Overhead}{Cost \:Driver}= Overhead \:Rate$

To calculate the overhead rate we divide the estimated overhead cost by the estimated cost driver:

$\frac{495,000}{900,000}= Overhead \:Rate$

0.55 overhead rate

Job 301 $20,000 labor cost x 0.55 overhead rate

11,000

Job 302 $30,000 labor cost x 0.55 overhead rate

16,500

Job 303 $40,000 labor cost x 0.55 overhead rate

22,000