Question

Pinnacle Inc. manufactures curtains to client specifications. It has two cost categories that are directly traced to its products: materials and labor. It also has estimated overhead that consists of:

• annual manufacturing supervisor's salary of $197,106
• annual manufacturing plant cleaning costs of $195,451
• annual manufacturing plant utilities of $165,700

Pinnacle is trying to calculate the cost of making Job #454, which includes:

• $10,785 in materials
• 23 hours of labor @ $12 per hour

The company also expects to use 21,055 labor hours for the year. If Pinnacle allocates overhead based on $250,000 estimated direct labor dollars, what is the total cost ofJob #454? *Hint, make a job order cost sheet for Job 454. It should include materials, labor, and overhead. Round each step to the nearest 2 decimal places. For your final answer, round to the nearest dollar.

Answer 1

Computation of Total cost of Job #454:

Total cost = Material + Labor + Overhead

= $10875 + (23 hours x $12) + ($21055 hours x $2.23)

= $10875 + $276 + $46952.65

= $58103.65 i.e. $58104.

Workings:

Overhead cost per Direct labor hour = Total Estimated overhead cost / Total Estimated Direct labor cost

Total Estimated overhead cost = $197106 + $195451 + $165700 = $558257.

Total Estimated Direct labor cost = $250000

Overhead cost per Direct labor hour = $558257 / $250000 = $2.23