Question

# Southern Rim Parts estimates its manufacturing overhead to be \$416,000 and its direct labor costs to...

Southern Rim Parts estimates its manufacturing overhead to be \$416,000 and its direct labor costs to be \$1,040,000 for year 1. The first three jobs that Southern Rim worked on had actual direct labor costs of \$63,000 for Job 301, \$88,000 for Job 302, and \$165,000 for Job 303. For the year, actual manufacturing overhead was \$409,000 and total direct labor cost was \$836,000. Manufacturing overhead is applied to jobs on the basis of direct labor costs using predetermined rates. Required: a. How much overhead was assigned to each of the three jobs, 301, 302, and 303? b. What was the over- or underapplied manufacturing overhead for year 1?

 Overhead rate = Estimated manufacturing overheads / Direct labor cost * 100

Overhead rate = \$416,000 / \$1,040,000 * 100 = 40% of direct labor cost

Requirement a:

 Jobs Computation \$ Job 301 \$63,000 * 40% 25,200 Job 302 \$88,000 * 40% 35,200 Job 303 \$165,000 * 40% 66,000

Requirement b:

Applied manufacturing overheads = \$836,000 * 40% = \$334,400

 Underapplied manufacturing overheads = \$334,400 - \$409,000 = \$74,600

All the best...

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