Question

Shotter Manufacturing is a small textile manufacturer using machine-hours to calculate the single indirect-cost rate to allocate manufacturing overhead costs to various jobs contracted during the year. The following estimates are provided for the coming year for the company and for the jackets to be made for Jackson High School Science Olympiad.

                                                    Company      Jackson High School Job

Direct materials                           $25,000                      $600

Direct manufacturing labor           $5,000                      $150

Manufacturing overhead costs     $30,000

Machine-hours (mh)                      50,000 mh                 800 mh

Required:

a. For Shotter Manufacturing, determine the annual manufacturing overhead cost-allocation rate.

b. Determine the amount of manufacturing overhead costs allocated to the Jackson High School job.

c. Determine the estimated total manufacturing costs for the Jackson High School job.

Answer 1

a. Annual manufacturing overhead cost-allocation rate = Estimated total manufacturing overhead cost / Estimated total machine hours = $30,000 / 50,000 mh = $0.6 per mh

b. Amount of manufacturing overhead costs allocated to the Jackson High School job = Estimated machine hours of Jackson High School job * Annual manufacturing overhead cost-allocation rate = 800 mh * $0.6 per mh = $480

c. Calculation of estimated total manufacturing costs for the Jackson High School job :

Direct materials	$600
(+) Direct manufacturing labor	$150
(+) Manufacturing overhead cost	$480
Estimated total manufacturing cost	$1,230