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2. Job Order Costing – Application of Overhead using a pre-determined OH rate (4pts):   Skaro, Ltd....

2. Job Order Costing – Application of Overhead using a pre-determined OH rate (4pts):   Skaro, Ltd. is a manufacturer that uses a job-order costing system. Assume Skaro uses a single plantwide predetermined Factory OH rate to apply overhead, and bases their predetermined OH rate on machine hours (Mh). At the beginning of 2020, the firm made the following estimates for the upcoming year:

Estimated Direct labor hours (DLh)

5,100 DLh

Estimated Machine hours (Mh)

22,000 Mh

Estimated total Variable Factory OH cost

$295,600

Estimated total Fixed Factory OH cost

$126,800

PART A (1pt): Calculate the predetermined OH rate. Round your final answer to 2 decimal places.

PART B (3pts): During January 2020, Skaro started and completed 2 jobs: PC12 and JW13. Each job had the following information, according to their job cost sheets:

Job PC12:

Job JW13:

# of Units in the job

20

# of Units in the job

15

Direct Labor hours used

9 DLh

Direct Labor hours used

7 DLh

Machine hours used

35 Mh

Machine hours used

29 Mh

DM costs

$1,305

DM costs

$982

DL costs

$135

DL costs

$105

Calculate the total manufacturing cost assigned to each job.

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Answer #1
Answer:
A)
Predetermined OH rate
           = Estimated total Factory OH cost / Estimated Machine hours
            = ( $ 295,600 + $ 126,800 ) / 22,000 Mh
            =      $ 422,400 / 22,000		 $ 19.20 per Mh
B)
Particulars Job PC12 Job JW13
DM costs $ 1,305 $ 982
DL costs $ 135 $ 105
Applied OH Costs $ 672
( 35 Mh x $ 19.20)		 $ 556.80
(29 Mh x $ 19.20 )
Total manufacturing cost assigned $ 2,112 $ 1,643.80
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