Finn Ltd., a manufacturer of cars, applies overhead based on direct labour hours

Question

Finn Ltd., a manufacturer of cars, applies overhead based on direct labour hours. For 20x3, total overhead is estimated to be $1675808 and total direct labour hours are estimated to be 141426.

Finn is working on Job 24, which currently has $38983 in direct materials and 492 hours (at a rate of $17 per hour) of direct labour attached to it. Below is the expected costs to complete the job:

Direct materials

$16147

Direct labour hours

539 hours

What is the total expected cost for Job 24?

Select one:

a. $79044

b. $72657

c. $84874

d. $31697

Direct materials

$16147

Direct labour hours

539 hours

Explanation / Answer

Estimated overhead rate = $1675808/141426 = 11.85 per hour
Total expected cost for Job 24:
Direct materials =$16147+ $38983 =   $55130
Direct labor hours = (539+492)*17 =    $17527
Overheads = (539+492)*11.85 =          $12217
Total expected cost = $84874

Option C

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