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 Fixed manufacturing overhead cost Variable manufacturing overhead cost per machine-hour 240,000 $ 4,320,000 $ 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 $4,000. The following information was available with respect to this job: Direct materials Direct labor cost Machine-hours used $ 1,840 $ 1,320 87 Compute the total manufacturing cost assigned to Job P90.

Answer 1

Requirement 1

Predetermined overhead rate = $20 per machine hour

Requirement 2

Direct material	$ 1,840.00
Direct labor	$ 1,320.00
Overhead applied	$ 1,740.00
Total manufacturing cost	$ 4,900.00

Working note

(A)	Budgeted Factory Overheads	$ 4,320,000
(B)	Budgeted Machine hours	240,000
C= (A/B)	Overhead rate for Fixed overhead	$ 18.00
D	Variable overhead rate	$ 2.00
E= C+D	Plantwide predetermined overhead rate	$ 20.00
F	Actual Machine hours	$ 87.00
G=E x F	Overheads Applied	$ 1,740