Doakes Corporation uses a job-order costing system with a single plantwide predetermined overhead rate based on direct labor-hours. The company based its predetermined overhead rate for the current year on the following data: Recently, Job M843 was completed with the following characteristics:
The unit product cost for Job M843 is closest to: (Round your intermediate calculations to 2 decimal places.)
A) $33.75
B) $67.50
C) $27.50
D) $50.50

Question

Doakes Corporation uses a job-order costing system with a single plantwide predetermined overhead rate based on direct labor-hours. The company based its predetermined overhead rate for the current year on the following data:  Recently, Job M843 was completed with the following characteristics:
 The unit product cost for Job M843 is closest to: (Round your intermediate calculations to 2 decimal places.)
A) $33.75 
B) $67.50 
C) $27.50 
D) $50.50

Quizplus · Accepted Answer

First, we need to calculate the total manufacturing costs for Job M843:

Direct materials = $2,725
Direct labor = 20 hours x $15 per hour = $300
Manufacturing overhead = 20 hours x $18 per DLH = $360

Total manufacturing cost = $2,725 + $300 + $360 = $3,385

Next, we can use the predetermined overhead rate to allocate overhead costs to the job:

Predetermined overhead rate = Total estimated manufacturing overhead / Total estimated direct labor-hours
Predetermined overhead rate = $96,000 / 6,000 DLHs = $16 per DLH

Manufacturing overhead allocated to Job M843 = $16 per DLH x 20 DLHs = $320

Finally, we can calculate the unit product cost for Job M843:

Unit product cost = Total manufacturing cost / Number of units produced
Unit product cost = $3,385 / 50 units = $67.70

The closest answer choice is B: $67.50.

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