Question

Chelsea, Inc. uses the job costing method and uses direct labor hours as the allocation base. In 2016, the company estimated that they would incur 250,000 direct labor hours and total overhead costs of $2,500,000. Actual overhead costs for Job 3489 were $275,000 and actual direct labor hours were 28,000. Which of the following represents the MOH allocated to Job 3489?

a. Predetermined MOH rate= total estimated manufacturing overhead costs/ total estimated amount of the allocation base
b. $250,000/ 25,000 DLH= $10
c. MOH allocated to job= predetermined MOH rate * actual amount of allocation base used by the job
d. $10 * 28,000 DLH= $280,000

Answer 1

Allocated MOH= 10*28,000

Step-by-step explanation:

First, we need to calculate the predetermined overhead rate:

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

Predetermined manufacturing overhead rate= 2,500,000 / 250,000

Predetermined manufacturing overhead rate= $10 per direct labor hour

Now, we can allocate overhead:

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

Allocated MOH= 10*28,000

Allocated MOH= $280,000