Question

Mannitou Company made the following predictions for 2016:

Factory overhead costs $300,000
Direct labor hours 50,000 hours
Machine hours 100,000 hours
Job A2 (which was started and completed in June) used 3,000 direct labor hours, 2,000 machine hours, and $57,000 of prime costs.
If factory overhead is applied based on machine hours, the cost of Job A2 for the Mannitou Company is:
a. $75,000.
b. $69,000.
c. $66,000.
d. $63,000.

Answer 1

The cost of Job A2 for the Manitou Company is $63,000.

Step-by-step explanation:

To calculate the cost of Job A2 for the Manitou Company, we need to determine the overhead cost per machine hour. In this case, the predicted factory overhead costs for 2016 is $300,000 and the predicted machine hours is 100,000 hours. Therefore, the overhead cost per machine hour is $3 ($300,000 / 100,000 hours).

Next, we can calculate the cost of Job A2 by multiplying the machine hours used (2,000 hours) by the overhead cost per machine hour ($3). This gives us a total overhead cost of $6,000 (2,000 hours x $3).

Adding the prime costs of $57,000 to the overhead costs of $6,000, the total cost of Job A2 for the Manitou Company is $63,000 (57,000 + 6,000).