Alpha Company estimates that annual manufacturing overhead costs will be $900,00

Question

Alpha Company estimates that annual manufacturing overhead costs will be $900,000. Estimated annual operating activity bases are: direct labor cost $450,000, direct labor hours 300,000, and machine hours 100,000. a Compute the predetermined overhead rate for each activity base. b. If Job 101 has 60,000 direct labor hours, compute the manufacturing overhead that it should be assigned using the predetermined overhead rate computed in question a. above. c If Job 102 has 25,000 machine hours, compute the manufacturing overhead that it should be assigned using the predetermined overhead rate computed in question a. above.

Explanation / Answer

a.

b.

Direct Labor Hours = 60,000

Manufacturing Overhead = Predetermined Overhead Rate * Direct Labor Hours

= $ 3 * 60,000

=$ 180,000

c.

Machine Hours = 25,000

Manufacturing Overhead = Predetermined Overhead Rate * Direct Labor Hours

= $ 9 * 25,000

=$ 225,000

i. Annual Manufacturing Overhead 900,000 ii. Direct Labor Cost 450,000 Predetermined Overhead Rate ( i/ii) 2.00 i. Annual Manufacturing Overhead 900,000 ii. Direct Labor Hours 300,000 Predetermined Overhead Rate ( i/ii) 3.00 i. Annual Manufacturing Overhead 900,000 ii. Machine Hours 100,000 Predetermined Overhead Rate ( i/ii) 9.00

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