Question

Job-Order Costing and Decision Making [LO2-1, LO2-2, LO2-3] Taveras Corporation is currently operating at 50% of its available manufacturing capacity. It uses a job-order costing system with a plantwide predetermined overhead rate based on machine-hours. At the beginning of the year, the company made the following estimates: Machine-hours required to support estimated production 245,000 Fixed manufacturing overhead cost $ 4,410,000 Variable manufacturing overhead cost per machine-hour $ 2.00

Required:
1. Compute the plantwide predetermined overhead rate.
2. During the year, Job P90 was started, completed, and sold to the customer for $4,100.
The following information was available with respect to this job:
Direct materials $ 1,886
Direct labor cost $ 1,353
Machine-hours used 88 Compute the total manufacturing cost assigned to Job P90.

Answer 1

1. $20

2. $4,999

Explanation:

1. The computation of plantwide predetermined overhead rate is shown below:-

Predetermined rate = Estimated overheads ÷ Estimated Machine hours + Variable rate per hour

= 4,410,000 ÷ 245,000 + 2

= $20 per machine hour

2. The computation of total manufacturing cost assigned to Job P90 is shown below:-

total manufacturing cost assigned to Job P90 = Direct material + Direct labor + Overhead applied

= $1,886 + $1,353 + (88 × 20)

= $1,886 + $1,353 + 1,760

= $4,999