Meenach 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 80,000 direct labor-hours, total fixed manufacturing overhead cost of $160,000, and a variable manufacturing overhead rate of $2.30 per direct labor-hour. Recently Job X387 was completed and required 120 direct labor-hours.Required:Calculate the amount of overhead applied to Job X387.

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) = $160,000 + ($2.30 per direct labor-hour × 80,000 direct labor-hours) = $160,000 + $184,000 = $344,000

Predetermined overhead rate = Estimated total manufacturing overhead cost ÷ Estimated total amount of the allocation base = $344,000 ÷ 80,000 direct labor-hours = $4.30 per direct labor-hour

Overhead applied to a particular job = Predetermined overhead rate x Amount of the allocation base incurred by the job = $4.30 per direct labor-hour × 120 direct labor-hours = $516