Chase Inc. uses a job order costing system. The estimated manufacturing overhead for the year is $3,500,000. The company has decided to allocate the manufacturing overhead to products on the basis of direct labour cost. The estimated direct labour costs for the year are $2,000,000.
Job # 123 has accumulated $10,000 of direct materials and $20,000 of direct labour costs. The rate per direct labour hour is $25.
l. How much manufacturing overhead will be applied to Job #123?
m. What is the total manufacturing cost of Job # 123 ?
Job # 124 has accumulated $18,000 of direct materials and $60,000 of direct labour costs. The rate per direct labour hour is $60.
Job # 125 has accumulated $12,000 of direct materials and $25,000 of direct labour costs. The rate per direct labour hour is $25.
At the end of the year over 40,000 different jobs were produced. Actual manufacturing overhead costs amounted to $3,200,000 instead of the $3,500,000 estimated at the beginning of the year. The actual direct labour costs amounted to $2,200,000 instead of the $2,000,000 estimated at the beginning of the year.
1) Overhead rate = 3500000/2000000 = 175% of direct labor cost
2) Overhead applied = 20000*1.75 = 35000
Total manufacturing cost = 10000+20000+35000 = 65000
3) Overhead applied = 60000*1.75 = 105000
Total manufacturing cost = 18000+60000+105000 = 183000
4) Overhead applied = 25000*1.75 = 43750
Total manufacturing overhead = 12000+25000+43750 = 80750
5) Overhead rate = 3500000/200000 = 1.75 per direct labor cost
Applied overhead = 2200000*1.75 = 3850000
Over applied
By (3850000-3200000) = 650000
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