Question

BUS 207 Assignment 3, Chapter 17, Problem

Moog manufactures custom-made electronic synthesizer boxes that can be added to keyboards. The company also provides repair services for broken or damaged synthesizers. Most of the work is done by hand with small tools used by craftsmen. Customers are quoted a price in advance of the synthesizer being assembled or repaired. To produce and repair these electronic units, management must have a thorough understanding of product costs.

Kristin Wentzel, Chief of Business Systems and Analytics, is considering using either direct labor hours or the number of jobs as the basis for allocating overhead costs. She has estimated the following amounts for the coming year:

Estimates for 2018
Total Overhead	$ 860,000
Estimated direct labor hours	16,000
Estimated number of jobs	3,000

Required:

a. Compute the overhead application rate based on (1) direct labor hours and (2) the number of jobs.

b. Shown below is information for two customer orders:

Job 1 Manufacture a custom synthesizer with intelligent loop recording. Direct materials used, $300, direct labor hours, 12; and direct labor costs $312.

Job 2 Repair broken synthesizer. Direct materials used $28, direct labor hours 4; and direct labor cost $104..

Determine the total cost of each job assuming that overhead costs are applied on the basis of:

1. Direct labor hours

2. Number of jobs

Answer 1

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