Question

Meenach Corporation uses a job-order costing system with a single plantwide predetermined overhead rate based on direct labor-hours. The company based its predetermined overhead rate for the current year on 74,000 direct labor-hours, total fixed manufacturing overhead cost of $74,000, and a variable manufacturing overhead rate of $3.10 per direct labor-hour. Recently Job X387 was completed and required 210 direct labor-hours.

Required:

Calculate the amount of overhead applied to Job X387. (Do not round intermediate calculations.)

Answer 1

Fixed predetermined overhead rate = Total fixed overhead cost/Total labor hours

                                                         = $ 74,000/74,000 = $ 1 PLH

Variable predetermined overhead rate = $ 3.10 PLH

Applied overhead rate = Fixed predetermined overhead rate + Variable predetermined overhead rate = $ 1 + $ 3.10 = $ 4.1 PLH

Applied overhead cost for Job X387 = Applied overhead rate x No. of labor hours required for job X387 = $ 4.1 x 210 = $ 861

Overhead cost applied to job X387 is $ 861