Question

Cook Manufacturing is a small textile manufacturer uses a predetermined overhead rate based on machine hours to apply manufacturing overhead to individual jobs. The following amounts are provided for the coming year for Cook Mfg. and Job 621.

                                                                                Cook                 Job 621

                Direct materials $34,000                 $2,800

                Direct labor                                         $35,000                 $3,200

                Manufacturing overhead costs $24,000

                Machine-hours 8,000 mh 400 mh

Calculate the Total Manufacturing costs of Job 621.

Multiple Choice

• $ 1,200

• $ 6,000

• $ 6,400

• $ 7,200

Answer 1

Answer : Option D, $7,200

Explanation :

Calculation of total manufacturing cost of job 621 :

Step 1 :

Manufacturing overhead allocated to job 621

= Machine Hours for job 621× predetermined overhead rate.

Step 2 :

Predetermined overhead rate :

= Manufacturing overhead cost/machine Hours

= $24,000/8,400

=$2.86 per machine Hour.

Step 3:

Total manufacturing cost of job 621:

Direct materials = $2,800

(+) Direct labour = $3,200

(+)Total manufacturing Overhead cost = $1,144

(400 mh ×$2.86 per mh)

Total manufacturing cost of job 621 = $7,144 ($2,800 + $3,200 + $1,144)

Note : According to the option given $7,200 near to the value $7,144 so considered as correct answer (like rounded off)