Question

In a company job costing method is used. The manufacturing department has indirect overhead costs of 100000 eur from production machines in the period. 1000 machine hours have been budgeted for the period. The costs of the project are recorded to job number A1, and the department's machines are used in the project for 10 hours. When overhead costs are allocated based on machine hours, how much overhead costs should be allocated for job number A1? .

Answer 1

The overhead cost allocated to job number A1 is €1,000, calculated by multiplying the 10 machine hours used by the €100 per machine hour rate.

Step-by-step explanation:

When allocating overhead costs based on machine hours in a job costing method, the total indirect overhead costs of €100,000 for the manufacturing department should be divided by the budgeted machine hours, which is 1,000 hours. This results in an allocation rate of €100 per machine hour.

For job number A1, which used 10 machine hours, the allocated overhead cost would be 10 hours multiplied by the €100 per machine hour rate. Therefore, the overhead cost allocated to job number A1 is €1,000.