Question

Manufacturing Overhead Allocation Base and Calculating the Cost of Jobs. Brenner Company expects to incur $3,000,000 in manufacturing overhead costs this year. During the year, it expects to use 50,000 direct labor hours at a cost of $600,000 and 80,000 machine hours.

Required:

1. Prepare a predetermined overhead rate based on direct labor hours, direct labor cost, and machine hours.

2. Why might Brenner Company prefer to use machine hours to allocate manufacturing overhead?

3. Using each of the predetermined overhead rates calculated in part a and the data that follows for job 128, determine the cost of job 128.

Direct materials	$6,000
Direct labor	$4,000 (200 hours at $15 per hour) + (100 hours at $10 per hour)
Machine time	700 hours

Answer 1

a) Predetermine overhead rate

Base on direct labor hour = 3000000/50000 = 60 per labor hour

Direct labor cost = 3000000/600000 = $5 per dollar of labor cost

Machine hour = 3000000/80000 = 37.50 per machine hour

b) Job Cost

	Base on labor hour	Base on labor cost	Base on machine hour
Direct material	6000	6000	6000
Direct labor	4000	4000	4000
Overhead	300*60 = 18000	4000*5 = 20000	700*37.50 = 26250
Total	28000	30000	36250

c) Brenner use machine hour because most of the companies activity by machining hour so brenner use machine hour for allocation