Gerstein 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 total fixed manufacturing overhead cost of $90,000, variable manufacturing overhead of $3.70 per direct labor-hour, and 50,000 direct labor-hours. The company recently completed Job M800 which required 150 direct labor-hours.The amount of overhead applied to Job M800 is closest to: (Round your intermediate calculations to 2 decimal places.)
A) $270
B) $1,380
C) $825
D) $555

Question

Quizplus · Accepted Answer

First, we need to calculate the predetermined overhead rate:

Predetermined overhead rate = (Total fixed manufacturing overhead cost + Variable manufacturing overhead cost) / Direct labor-hours 
= ($90,000 + ($3.70 x 50,000))/50,000 
= $91,850 / 50,000 
= $1.837 per direct labor-hour

Next, we can calculate the amount of overhead applied to Job M800:

Overhead applied = Predetermined overhead rate x Actual direct labor-hours 
= $1.837 x 150 
= $275.55

We round this to the nearest dollar, which gives us $276.

Therefore, the closest answer choice is C, $825.

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