Question

Southern Rim Parts estimates its manufacturing overhead to be $432,000 and its direct labor costs to be $1,080,000 for year 1. The first three jobs that Southern Rim worked on had actual direct labor costs of $67,000 for Job 301, $92,000 for Job 302, and $185,000 for Job 303. For the year, actual manufacturing overhead was $389,000 and total direct labor cost was $832,000. Manufacturing overhead is applied to jobs on the basis of direct labor costs using predetermined rates. Required: a. How much overhead was assigned to each of the three jobs, 301, 302, and 303? b. What was the over- or underapplied manufacturing overhead for year 1? Complete this question by entering your answers in the tabs below. Required A Required B How much overhead was assigned to each of the three jobs, 301, 302, and 303? Job 301 Job 302 Job 303 < Required A Required B

Answer 1

Solution:

Required A:

Job 301	$            26,800
Job 302	$            36,800
Job 303	$            74,000

Working:

Predetermined Overhead Rate = Estimates Overhead Cost / Estimated Direct Labor Cost = $ 432,000 / $ 1,080,000 = 40%

	Actual Labor Cost (a)	Overhead rate (b)	Overhead Assigned (a*b)
Job 301	$                          67,000	40%	$                                    26,800
Job 302	$                          92,000	40%	$                                    36,800
Job 303	$                       185,000	40%	$                                    74,000

Required B:

Under applied Manufacturing Overhead = Actual Overhead - Overhead Applied = $ 56,200

Overhead Applied = Actual Direct labour * Overhead Rate = $ 832,000 * 40% = $ 332,800

Actual Overhead (Given) =$ 389,000.