Question

PA2.

LO 4.4York Company is a machine shop that estimated overhead will be $50,000, consisting of 5,000 hours of direct labor. The cost to make Job 0325 is $70 in aluminum and two hours of labor at $20 per hour. During the month, York incurs $50 in indirect material cost, $150 in administrative labor, $300 in utilities, and $250 in depreciation expense.

What is the predetermined overhead rate if direct labor hours are considered the cost driver?
What is the cost of Job 0325?
What is the overhead incurred during the month?

Answer 1

Instructions are listed below.

Step-by-step explanation:

Giving the following information:

The estimated overhead will be $50,000, consisting of 5,000 hours of direct labor.

The cost to make Job 0325 is $70 in aluminum and two hours of labor at $20 per hour.

During the month, York incurs $50 in indirect material cost, $150 in administrative labor, $300 in utilities, and $250 in depreciation expense.

First, we need to calculate the estimated overhead using the following formula:

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

Estimated manufacturing overhead rate= 50,000/5,000= $10 per direct labor hour.

Now, we can allocate overhead to Job 0325:

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

Allocated MOH= $10*2= $20

Total job cost= 70 + 20 + 2*20= $130

Finally, we determine the total overhead incurred in the period:

Overhead= indirect material + utilities + depreciation= 50 + 300 + 250= $600