Question

Parker Company uses a job-order costing system and applies manufacturing overhead to jobs using a predetermined overhead rate based on direct labor-hours. Last year manufacturing overhead and direct labor-hours were estimated at $50,000 and 20,000 hours, respectively, for the year. In June, Job #461 was completed. Materials costs on the job totaled $4,000 and labor costs totaled $1,500 at $5 per hour. At the end of the year, it was determined that the company worked 24,000 direct labor-hours for the year and incurred $54,000 in actual manufacturing overhead costs. Required: a. Job #461 contained 100 units. Determine the unit product cost that would appear on the job cost sheet. b. Determine the underapplied or overapplied overhead for the year.

Answer 1

Instructions are below.

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= (50,000/20,000)

Predetermined manufacturing overhead rate= $2.5 per direct labor hour

Now, we can determine the total cost and unitary cost of Job 461:

Direct labor hours= 1,500/5= 300

Total cost= 4,000 + 1,500 + 2.5*300= $6,250

Unitary cost= 6,250/100= $62.5

To calculate the under/over allocation, first, we allocate overhead for the whole company:

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

Allocated MOH= 2.5*24,000= $60,000

Under/over applied overhead= real overhead - allocated overhead

Under/over applied overhead= 54,000 - 60,000

Under/over applied overhead= $6,000 overallocated