Robbson Manufacturers has estimated total factory overhead costs of $184,000 and 25,000 direct labor hours for the current fiscal year.If job number 115 incurred 1,200 direct labor hours, the work-in-process account will be increased and factory overhead will be decreased by:
A) $25,000.
B) $8,832.
C) $7,022.
D) $153.

Question

Quizplus · Accepted Answer

To determine the overhead rate, we need to divide the estimated total factory overhead costs by the estimated total direct labor hours:

Overhead rate = $184,000 / 25,000 = $7.36 per direct labor hour

To calculate the overhead cost for job 115, we can multiply the direct labor hours by the overhead rate:

Overhead cost = 1,200 x $7.36 = $8,832

Since job 115 is in process, its cost will be added to the work-in-process account. At the same time, the factory overhead will be decreased by the amount of overhead cost allocated to job 115.

Therefore, the work-in-process account will be increased by $8,832 and the factory overhead will be decreased by $8,832, resulting in a net impact of $0 on the total overhead costs for the year.

Option A is not correct because $25,000 is the estimated total overhead cost, not the overhead cost for job 115.

Option C is not correct because it does not take into account the overhead rate per direct labor hour.

Option D is not correct because $153 is too small to be a realistic amount of overhead cost for a job with 1,200 direct labor hours.

Robbson Manufacturers Has Estimated Total Factory Overhead Costs of $184,000