Posson 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 20,000 machine-hours, total fixed manufacturing overhead cost of $130,000, and a variable manufacturing overhead rate of $3.00 per machine-hour. Job K789, which was for 10 units of a custom product, was recently completed. The job cost sheet for the job contained the following data:?Total machine-hours30?Direct materials$775?Direct labor cost$1,170Required:a. Calculate the predetermined overhead rate for the year.b. Calculate the amount of overhead applied to Job K789.c. Calculate the total job cost for Job K789.d. Calculate the unit product cost for Job K789.

Question

What will be an ideal response?

Answer 1

a. 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) = $130,000 + ($3.00 per machine-hour × 20,000 machine-hours) = $130,000 + $60,000 = $190,000

Predetermined overhead rate = Estimated total manufacturing overhead cost ÷ Estimated total amount of the allocation base = $190,000 ÷ 20,000 machine-hours = $9.50 per machine-hour

b. Overhead applied to a particular job = Predetermined overhead rate x Amount of the allocation base incurred by the job = $9.50 per machine-hour × 30 machine-hours = $285