Question

Southern Rim Parts estimates its manufacturing overhead to be $495,000 and its direct labor costs to...

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?

Homework Answers

Answer #1

Answers

  • Workings

A

Estimated manufacturing Overhead

$495,000

B

Direct labor cost

$900,000

C = A/B

Predetermined Overhead rates

55%

  • Requirement ‘a’

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

  • Requirement ‘b’

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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