Question

Hahn Company uses a job-order costing system. Its plantwide predetermined overhead rate uses direct labor-hours as the allocation base. The company pays its direct laborers $19.50 per hour. During the year, the company started and completed only two jobs—Job Alpha, which used 55,900 direct labor-hours, and Job Omega. The job cost sheets for the these two jobs are shown below: Job Alpha Direct materials ? Direct labor ? Manufacturing overhead applied ? Total job cost $ 2,230,000 Job Omega Direct materials $ 341,400 Direct labor 452,400 Manufacturing overhead applied 290,000 Total job cost $ 1,083,800 Required: 1. Calculate the plantwide predetermined overhead rate. 2. Complete the job cost sheet for Job Alpha.

Answer 1

Predetermined overhead rate is the rate at which the overheads are being allocated to different divisions. The formula for allocating the overheads to division is (Allocation base X Plant wide predetermined rate)

1. Plant wide predetermined rate is $12.50 per direct labor hour

Overheads allocated to Project Omega = (Allocation base X Plant wide predetermined rate)

$290,000 = (Direct labor hours for Project Omega X Predetermined rate per hour)

$290,000 = (23,200 hours X Predetermined rate per hour)

Predetermined rate = $12.50 per hour

2. Job Cost sheet of Job Alpha

Base for overhead rate Direct labor hours Rate per direct labor hr: $19.50 Job Alpha Job Omega Particulars Units Particulars Units Amount na $441,200 55,900$19.50 $1,090,050 Manufacturing overhead 55,900$12.50$698,750 $2,230,000 Rate Amount $341,400 23,200$19.50 $452,400 Manufacturing overhead 23,200$12.50 $290,000 $1,083,800 Rate Direct material Direct labor Direct material Direct labor na na na Total Total Step 1 Step 2 Step 3 Step 4 Derived values based on information given in the question Since, the base for overhead allocation is direct labor hours, the rate will be $290,000/23,200 hrs Overhead allocation rate for Job Alpha will be same as Job Omega Direct Material for Project Alpha il be balancing figure