Question

Graham Manufacturing is a small manufacturer that uses machine-hours as its activity base for assigned overhead costs to jobs. The company estimated the following amounts for 2019 for the company and for Job 62: Direct materials Direct labor Manufacturing overhead costs Machine hours Company Job 62 $60,000 $4,500 $25,000 $2,500 $72,000 90,000 1,350 During 2019, the actual machine-hours totaled 95,000, and actual overhead costs were $71,000. Compute the predetermined overhead rate. (Round answer to 2 decimal places, e.g. 52.75.) Predetermined overhead rates per machine hour Compute the total manufacturing costs for Job 62. Total manufacturing costs How much overhead is over or underapplied for the year for the company? State amount and whether it is over- or underapplied. Overhead If Graham Manufacturing sells Job 62 for $14,000, compute the gross profit. Gross profit

Answer 1

Answer:

1. Computation of predetermined overhead rate

Predetermined overhead rate = Total estimated manufacturing overhead cost / Total estimated machine hours

                                                      = $72,000 / 90,000

                                                       = $0.8 Per machine hour

2. Computation of total manufacturing costs for Job 62

Total manufacturing costs

= Direct Materials + Direct labor + Manufacturing overhead cost

= $4,500 + $2,500 + ($0.8 per machine hour * 1,350 machine hours)

= $7,000 + $1,080

= $8,080

3. Overhead over or under applied

Overhead cost applied using predetermined rate ($0.8 * 95,000) = $76,000

Less: Actual overhead costs                                                                   = ($71,000)

                                                                  Over applied overhead cost = $5,000

4. Computation of gross profit for Job 62

            Sales revenue      = $14,000

Less:Total manufacturing costs = ($8,080)

                                Gross profit      = $5,920

   Gross profit for Job 62 is $5,920.