Thach Corporation uses a job-order costing system with a single plantwide predetermined overhead rate based on machine-hours. The company based its predetermined overhead rate for the current year on total fixed manufacturing overhead cost of $665,000, variable manufacturing overhead of $3.00 per machine-hour, and 70,000 machine-hours. Recently, Job T321 was completed with the following characteristics: The unit product cost for Job T321 is closest to:
A) $117.00
B) $58.50
C) $154.50
D) $51.50

Question

Thach Corporation uses a job-order costing system with a single plantwide predetermined overhead rate based on machine-hours. The company based its predetermined overhead rate for the current year on total fixed manufacturing overhead cost of $665,000, variable manufacturing overhead of $3.00 per machine-hour, and 70,000 machine-hours. Recently, Job T321 was completed with the following characteristics:  The unit product cost for Job T321 is closest to:
A) $117.00 
B) $58.50 
C) $154.50 
D) $51.50

Quizplus · Accepted Answer

Estimated total manufacturing overhead cost = Estimated total fixed manufacturing overhead cost + (Estimated variable overhead cost per unit of the allocation base × Estimated total amount of the allocation base) = $665,000 + ($3.00 per machine-hour × 70,000 machine-hours) = $665,000 + $210,000 = $875,000
Predetermined overhead rate = Estimated total manufacturing overhead cost ÷ Estimated total amount of the allocation base = $875,000 ÷ 70,000 machine-hours = $12.50 per machine-hour
Overhead applied to a particular job = Predetermined overhead rate x Amount of the allocation base incurred by the job = $12.50 per machine-hour × 90 machine-hours = $1,125
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Thach Corporation Uses a Job-Order Costing System with a Single