Question

MULTIPLE CHOICE. Choose the one alternative that best completes the question. 1). A company has an overhead application rate of 125% of direct labor costs. How much overhead would be allocated to a job if it required total labor costing $20,000? a). $5,000 b). $16,000 c). $25,000 d). $125,000 e). $250,000 2). CWN Company uses a job order costing system and last period incurred $80,000 of actual overhead and $100,000 of direct labor. CWN estimates that its overhead next period will be $75,000. It also expects to incur $100,000 of direct labor. If CWN bases applied overhead on direct labor cost, its predetermined overhead rate for the next period should be: a). 75% b). 80% c). 107% d). 125% e). 133% 3). Minstrel Manufacturing uses a job order costing system. During one month, Minstrel purchased $198,000 of raw materials on credit; issued materials to production of $195,000 of which $30,000 were indirect. Minstrel incurred a factory payroll of $150,000, of which $40,000 was indirect labor. Minstrel uses a predetermined overhead rate of 150% of direct labor cost. The total manufacturing costs added during the period are: a). $440,000 b) $470,000 c). $500,000 d). $570,000 e) $540,000 4. Adams Manufacturing allocates overhead to production on the basis of direct labor costs. At the beginning of the year, Adams estimated total overhead of $396,000; materials of $410,000 and direct labor of $220,000. During the year Adams incurred 5418,000 in materials costs, 5413,200 in overhead costs and $224,000 in direct labor costs. Compute the amount of overhead applied to jobs during the year. a). 5396,000 b). $424.450 5413,190 d) 5413,200 el 5403.200

Answer 1

Ans 1 (c )
Overhead allocated to Job on the basis of 125% of Direct Labor cost
Direct Labor cost	$     20,000.00
Overhead allocated to Job =(20000*125%)	$     25,000.00
2(a)
Last period Actual overhead	$     80,000.00
Actual Direct Labor	$ 1,00,000.00
Next Period Estimated Overhead=(A)	$     75,000.00
Estimated Direct Labor Cost=(B)	$ 1,00,000.00
Predetermined Overhead=Estimated Overhead/Estimated allocation base
Predetermined Overhead=(A)/(B)	75%
3(a)
Factory Payroll	$ 1,50,000.00
Indirect Labor	$     40,000.00
Direct Labor	$ 1,10,000.00
Predetermined Overhead is 150% of direct labor cost=($110000*150%)	$ 1,65,000.00
Total Manufacturing Cost
Direct Material($195000-$30000)	$ 1,65,000.00
Direct Labor($150000-$40000)	$ 1,10,000.00
Predetermined Overhead	$ 1,65,000.00
Total Manufacturing Cost	$ 4,40,000.00
4(e)
Predetermined Overhead=Estimated Overhead/Estimated allocation base
Estimated Overhead=(A)	396000
Direct Labor Cost=(B)	220000
Predetermined Overhead=(A)/(B)	180%
Overhead applied to job=Direct Labor cost*180%
Direct Labor cost=	224000
Overhead applied to job=($224000*180%)	$ 4,03,200.00