Question

You work for Thunderduck Custom Tables Inc. This is the first month of operations. The company designs and manufactures specialty tables. Each table is specially customized for the customer. This month, you have been asked to develop and manufacture two new tables for customers. You will design and build the tables. This is a no nail, no screw, and no glue manufacturing ( no indirect materials used). You will be keeping track of the costs incurred to manufacture the tables using Job #1 Cost Sheet and Job #2 Cost Sheet.
	The cost of the direct materials that can be used to manufacture the table are as follows. These cost are on a per unit basis.
		Table Top	$1,400.00
		Table Leg	$400.00
		Drawer	$340.00
	The company uses a job order costing system and applies manufacturing overhead to jobs based on direct labor hours.
	The company estimates that there will be 12 direct labor hours worked during the month.
	The estimated manufacturing overhead cost for the month is:
	a.	Factory supervisor salary per month	$4,500.00
	b.	Rent for the factory per month	$900.00
	c.	Depreciation of factory equipment per month	$600.00
		Total Estimated manufacturing overhead	$6,000.00
	What is the predetermined manufacturing overhead rate?

Answer 1

Total estimated manufacturing cost = $6,000

Estimated direct labor hours = 12

Predetermined manufacturing overhead rate = Total estimated manufacturing cost/Estimated direct labor hours

= 6,000/12

= $500 per direct labor hour

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