Spang 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 the following data: Recently, Job P505 was completed with the following characteristics:
The amount of overhead applied to Job P505 is closest to:
A) $2,200
B) $1,760
C) $2,640
D) $440

Question

Spang 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 the following data:  Recently, Job P505 was completed with the following characteristics:
 The amount of overhead applied to Job P505 is closest to:
A) $2,200 
B) $1,760 
C) $2,640 
D) $440

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) = $176,000 + ($2.20 per machine-hour × 20,000 machine-hours) = $176,000 + $44,000 = $220,000
Predetermined overhead rate = Estimated total manufacturing overhead cost ÷ Estimated total amount of the allocation base = $220,000 ÷ 20,000 machine-hours = $11.00 per machine-hour
Overhead applied to a particular job = Predetermined overhead rate × Amount of the allocation base incurred by the job = $11.00 per machine-hour × 200 machine-hours = $2,200

Spang Corporation Uses a Job-Order Costing System with a Single