Question

Taveras Corporation is currently operating at 50% of its available manufacturing capacity. It uses a job-order costing system with a plantwide predetermined overhead rate based on machine-hours. At the beginning of the year, the company made the following estimates:

Machine-hours required to support estimated production		170,000
Fixed manufacturing overhead cost	$	1,700,000
Variable manufacturing overhead cost per machine-hour	$	2.00

Required:

1. Compute the plantwide predetermined overhead rate.

2. During the year, Job P90 was started, completed, and sold to the customer for $2,000. The following information was available with respect to this job:

Direct materials	$	920
Direct labor cost	$	660
Machine-hours used		73

Compute the total manufacturing cost assigned to Job P90.

Answer 1

Requirement 1

Plantwide predetermined overhead rate

$ 12.00

Working

(A)	Budgeted Factory Overheads	$ 1,700,000
(B)	Budgeted Direct labor cost	170,000
C= (A/B)	Predetermined Overhead rate	$                   10.00
D	Variable overhead rate	$ 2.00
E= C+D	Plantwide predetermined overhead rate	$ 12.00

Requirement 2

Total manufacturing cost calculation
Direct material	$ 920.00
Direct labor	$ 660.00
Overhead applied	$ 876.00
Total manufacturing cost for JOB P90	$ 2,456.00