Southern Rim Parts estimates its manufacturing overhead to be $495,000 and its direct labor costs to be $900,000 for year 1. The first three jobs that Southern Rim worked on had actual direct labor costs of $20,000 for Job 301, $30,000 for Job 302, and $40,000 for Job 303. For the year, actual manufacturing overhead was $479,000 and total direct labor cost was $850,000. 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?
Answers
A |
Estimated manufacturing Overhead |
$495,000 |
B |
Direct labor cost |
$900,000 |
C = A/B |
Predetermined Overhead rates |
55% |
Workings |
Job 301 |
Job 302 |
Job 303 |
|
A |
Direct Labor cost |
$20,000 |
$30,000 |
$40,000 |
B |
Predetermined Overhead rates |
55% |
55% |
55% |
C = A x B |
Overhead assigned = ANSWER |
$11,000 |
$16,500 |
$22,000 |
A |
Total Direct Labor cost |
$850,000 |
B = A x 55% |
Total Overhead applied at 55% rate |
$467,500 |
C |
Total actual manufacturing overhead |
$479,000 |
Overheads are |
UNDER-APPLIED |
|
D = C - B |
Overheads Under-Applied by |
$11,500 Underapplied = Answer |
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