J & J Products uses operational costing. One of their customers has requested 1,000 units of an identical product. J & J estimates the following will be incurred to fulfill the customer order: Total direct materials $2,000 Total direct labor hours 50
hours Direct labor cost per hour $20 per hour In addition, J & J allocates overhead based on direct labor cost. At the beginning of this year, they estimated overhead costs would total $800,000 and direct labor would cost a total of $3,200,000. Required: A. What will be the predetermined overhead rate used during the year? B. What will be the total manufacturing costs for the above customer's order?
A. Predetermined overhead rate = $800,000 ΒΈ $3,200,000 = $.25 per direct labor dollar
(or 25% of direct labor cost)
B. The total product cost is $3,250 calculated as follows:
Direct material $2,000
Direct labor (50 x $20 ) 1,000
Applied overhead ($.25 x $1,000 ) 250
Total product cost $3,250
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