Question

Question 1:

Magma Inc. uses a job-order costing system with a single plant wide predetermined overhead rate based on direct labor hours. The company based its predetermined overhead rate for the current year with the following data:

Total direct labor-hours 50,000

Total fixed manufacturing cost $100,000

Variable manufacturing overhead per direct labor-hour $4.00

Recently Job #6969 was completed the following characteristics:

# of units in the job 20

Total direct labor-hours 100

Direct Materials $755

Direct Labor Cost $4,000

The estimated total manufacturing overhead is closet to:

A) $216,000

B) $96,000

C) $96,003

D) $300,000

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Question 2

Lorax Mfg. Ltd uses a predetermined overhead rate to apply manufacturing overhead to jobs. The predetermined overhead rate is based on labor-hours in Dept. C and on machine-hours in Dept. D. At the beginning of the year, the Corporation made the following estimates:

	Dept. C		Dept. D
Direct labor cost	$	60,000	$	30,000
Manufacturing overhead	$	90,000	$	45,000
Direct labor-hours		6,000		9,000
Machine-hours		2,000		15,000

What predetermined overhead rates would be used in Dept. C and Dept. D, respectively?

A) $23.33 and 250%

B) $23.33 and $5.00

C) $15.00 and 150%

D) $15.00 and $3.00

Answer 1

1)
Particulars	Amount ( in $)
Estimted Variable manufaturing Cost ( 50,000 x $ 4)	$ 200,000
Estimted fixed manufacturing cost	$ 100,000
Estimated Total manufacturing overhead	$ 300,000
Option (D) is Correct
2)
Predetermined overhead rate - Dept C         = Estimated Manufacturing overhead / Direct labor-hours         = $ 90,000 / 6,000         =   $ 15	$ 15
Predetermined overhead rate - Dept D         = Estimated Manufacturing overhead / Machine-hours         = $ 45,000 / 15,000         =   $ 3	$ 3
Option (D) is Correct