Franta Corporation uses a job-order costing system with a single plantwide predetermined overhead rate based on direct labor-hours. The company based its predetermined overhead rate for the current year on 70,000 direct labor-hours, total fixed manufacturing overhead cost of $238,000, and a variable manufacturing overhead rate of $2.70 per direct labor-hour. Job P873, which was for 50 units of a custom product, was recently completed. The job cost sheet for the job contained the following data:?Total direct labor-hours200?Direct materials$630?Direct labor cost$4,800Required:Calculate the unit product cost for Job P873.

Question

What will be an ideal response?

Answer 1

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) = $238,000 + ($2.70 per direct labor-hour × 70,000 direct labor-hours) = $238,000 + $189,000 = $427,000

Predetermined overhead rate = Estimated total manufacturing overhead cost ÷ Estimated total amount of the allocation base = $427,000 ÷ 70,000 direct labor-hours = $6.10 per direct labor-hour

Overhead applied to a particular job = Predetermined overhead rate × Amount of the allocation base incurred by the job = $6.10 per direct labor-hour × 200 direct labor-hours = $1,220