Question

Ashland Corporation estimates its manufacturing overhead costs to be $360,000 and its direct labor costs to be $400,000 for 2020. The actual manufacturing labor costs were $120,000 for job 1, $180,000 for job 2 and $200,000 for job 3 during 2020. Manufacturing overhead is applied to jobs on the basis of direct labor costs using a predetermined overhead rate. The actual manufacturing overhead cost for the year was $212,000. The amount of overhead assigned to Job 3 during 2020 was:

Answer 1

Allocated MOH= $180,000

Step-by-step explanation:

Giving the following information:

Manufacturing overhead is applied to jobs based on direct labor costs using a predetermined overhead rate.

The estimated manufacturing overhead costs are $360,000 and direct labor costs $400,000.

First, we need to calculate the MOH rate:

Estimated manufacturing overhead rate= total estimated overhead costs for the period/ total amount of allocation base

Estimated manufacturing overhead rate= 360000/400000= $0.9 per direct labor dollar.

The actual manufacturing labor costs for job 3 are $200,000.

Allocated MOH= Estimated manufacturing overhead rate* Actual amount of allocation base

Allocated MOH= 0.9*200000= $180,000