Question

Snappy Company has a job-order costing system and uses a predetermined overhead rate based on direct labor-hours to apply manufacturing overhead to jobs. Manufacturing overhead cost and direct labor hours were estimated at $108,000 and 45,000 hours, respectively, for the year. In July, Job #334 was completed at a cost of $3,050 in direct materials and $2,500 in direct labor. The labor rate is $5 per hour. By the end of the year, Snappy had worked a total of 51,000 direct labor-hours and had incurred $118,950 actual manufacturing overhead cost.

If Job #334 contained 150 units, the unit product cost on the completed job cost sheet would be:

Answer 1

Predetermined overhead rate = Estimated overhead cost / Estimated direct labor hours

Predetermined overhead rate = $108,000/45,000 = $2.4

Actual direct labor hours worked for Job #334 = $2,500/$5 = 500 hours

	Job #334
Direct material	$3,050
Direct labor	2,500
Applied overhead (500*$2.4)	1,200
Total cost	$6,750
Total units	150
Unit product cost ($6,750/150)	$45