Your Company uses a predetermined overhead rate in applying overhead to producti

Question

Your Company uses a predetermined overhead rate in applying overhead to production orders on a labor cost basis in Department A and on a machine-hours basis in Department B. At the beginning of the most recently completed year, the company made the following estimates: Direct labor cost . Manufacturing overhead ..... Direct labor-hours... Machine-hours. Dept. A S56,000 S67,200 8,000 4,000 Dept. B s33,000 S45,000 9,000 15,000 The Johnson job used 300 machine hours and incurred $5,000 of labor costs What was the total overhead applied to this jah? ENTER YOUR ANSWER WITHOUT DOLLAR SIGNS OR OTHER DISCRIPTIONS

Explanation / Answer

Department A Pre-deremined overhead rate = Estimated Manufacturing overhead/Estimated Direct costs Estimated Manufacturing overhead of Department A = $67200 Estimated Direct labour hours = 56000 Pre-deremined overhead rate = 67200/56000 = $1.2 Actual direct labour costs = $5000 Applied overhead = $5000*1.2 = $6000 Department B Pre-deremined overhead rate = Estimated Manufacturing overhead/Estimated machine hours Estimated Manufacturing overhead of Department B = $45000 Estimated machine hours = 15000 Pre-deremined overhead rate = 67200/8000 = $8.4 = $3 Actual machine hours = 300 Applied overhead = 300*3 = $900 Total applied overhead = $6000+$900 = $6900

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