Thrall Corporation uses a job-order costing system with a single plantwide predetermined overhead rate based on machine-hours. The company based its predetermined overhead rate for the current year on the following data: ?Total machine-hours10,000?Total fixed manufacturing overhead cost$50,000?Variable manufacturing overhead per machine-hour$3.90Recently Job K125 was completed and required 160 machine-hours.Required:Calculate the amount of overhead applied to Job K125.
What will be an ideal response?
Estimated total manufacturing overhead cost = Estimated total fixed manufacturing overhead cost + (Estimated variable overhead cost per unit of the allocation base × Estimated total amount of the allocation base) = $50,000 + ($3.90 per machine-hour × 10,000 machine-hours) = $50,000 + $39,000 = $89,000
Predetermined overhead rate = Estimated total manufacturing overhead cost ÷ Estimated total amount of the allocation base = $89,000 ÷ 10,000 machine-hours = $8.90 per machine-hour
Overhead applied to a particular job = Predetermined overhead rate x Amount of the allocation base incurred by the job = $8.90 per machine-hour × 160 machine-hours = $1,424
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