Question

X Company, a manufacturer, uses a plantwide overhead allocation system with direct labor hours as the cost driver. The following is budgeted total cost and activity information in 2018: Direct $426,923 materials Direct labor $523,585 Overhead $555,000 Research & development $100,000 Advertising $59,000 Direct labor 26,056 hours The following information is taken from the job cost sheet for Job A in 2018: Direct Materials Total $45,765 Direct Direct Labor Labor Overhead Hours $85,500 689 ?? How much overhead was allocated to Job A (round overhead rate(s) to two decimal places)?

Answer 1

Predetermined overhead rate = Estimated overhead / Estimated direct labor hour

= 555,000/26,056

= $21.30 per direct labor hour

Applied overhead = Predetermined overhead rate x actual direct labor hour used

= 21.30 x 689

= $14,676

Overhead was allocated to Job A = $14,676

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