Question

Sunland Manufacturing thinks that the best activity base for its manufacturing overhead is machine hours. The estimate of annual overhead costs is $720000. The company used 1000 hours of processing for Job A15 during the period and incurred actual overhead costs of $740000. The budgeted machine hours for the year totaled 20000. What amount of manufacturing overhead should be applied to Job A15?

A. $36000.
B. $740.
C. $720.
D. $37000.

Answer 1

The amount of manufacturing overhead to be applied to Job A15 is A)$36,000, calculated using a predetermined overhead rate based on machine hours.

Step-by-step explanation:

The amount of manufacturing overhead that should be applied to Job A15 can be calculated by using the predetermined overhead rate which is based on machine hours. Sunland Manufacturing estimated their annual overhead costs at $720,000 and budgeted for a total of 20,000 machine hours, which results in a predetermined overhead rate of ($720,000 ÷ 20,000 hours) = $36 per machine hour.

For Job A15, which used 1,000 hours of machine time, the manufacturing overhead applied would be (1,000 hours × $36 per hour) = $36,000.

Therefore, the amount of manufacturing overhead to be applied to Job A15 is $36,000, which corresponds to option A.