Question

Prather Corporation uses a job-order costing system with a single plantwide predetermined overhead rate based on direct labor hours. The company based its predetermined overhead rate for the current year on the following data: Total direct labor-hours Total fixed manufacturing overhead cost Variable manufacturing overhead per direct labor-hour 50,000 $ 285,000 S 3.80 Recently, Job P513 was completed with the following characteristics: 20 Number of units in the job Total direct labor-hours Direct materials Direct labor cost $ 710 500 The amount of overhead applied to Job P513 is closest to: A) $76 B) 5190 C) $266 D) S114 The total job cost for Job P513 is closest to: A) $690 B) 8900 C) $1,400 D) $1,210

Answer 1

Ans. 1	Option B   $190
	*Calculations:
	*Variable manufacturing overhead = Variable overhead cost per labor hour * Direct labor hours required
		$3.80 * 50,000
		$190,000
	*Total estimated overhead cost = Variable manufacturing overhead + Fixed manufacturing overhead
		$190,000 + $285,000
		$475,000
	Predetermined overhead rate = Total Estimated overhead cost / Estimated labor hours
		$475,000 / 50,000
		$9.50	per direct labor hour
	Overhead cost applied = Predetermined overhead rate * Actual direct labor hours
		$9.50 * 20
		$190
Ans. 2	Option C $1,400
	*Calculations:
	Particulars	Amount
	Direct materials	$710
	Direct labor cost	$500
	Overhead applied	$190
	Total Job Cost for Job P513	$1,400