Question

OlneyOlney

Recycling recycles​ newsprint, cardboard, and so​ forth, into recycled packaging materials. For the coming​year,

OlneyOlney

estimates total manufacturing overhead to be

$ 360 comma 360$360,360.

The​ company's managers are not sure if direct labor hours​ (estimated to be

10 comma 01010,010​)

or machine hours​ (estimated to be

18 comma 01818,018

​hours) is the best allocation base to use for allocating manufacturing overhead.

OlneyOlney

bids for jobs using a

2828​%

markup over total manufacturing cost.

After the new fiscal year​ began,

Hollings Paper SupplyHollings Paper Supply

asked

OlneyOlney

Recycling to bid for a job that will take

1 comma 9801,980

machine hours and

1 comma 7001,700

direct labor hours to produce. The direct labor cost for this job will be

$ 10$10

per​ hour, and the direct materials will total

$ 25 comma 100.$25,100.  

Read therequirements

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.

Requirement 1. Compute the total job cost and bid price if

OlneyOlney

Recycling decided to use direct labor hours as the manufacturing overhead allocation base for the year.

First calculate the predetermined overhead rate based on direct labor hours. Identify the formula and then compute the rate.

Answer 1

Predetermined overhead rate

$36

per direct labor hour

Working:

Predetermined overhead rate
Estimated total manufacturing overhead	A	360360
Estimated direct labor hours	B	10010
Overhead rate per direct labor hour (A / B)	C	36

Total cost of the job	$103,300
Bid Price	$132,224

Working:

Direct material cost	a	25100
Direct labor cost (1,700 hrs @$10 per hour)	b	17000
Manufacturing overhead (1,700 hours @$36 per hour)	c	61200
Total cost of the job (a+b+c)	d	103300
Mark up -- 28% x d	e	28924
Bid Price (d+e)	f	132224