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 total job cost for Job P505 is closest to:
A) $9,400
B) $9,940
C) $7,740
D) $2,740

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 total job cost for Job P505 is closest to:
A) $9,400 
B) $9,940 
C) $7,740 
D) $2,740

Quizplus · Accepted Answer

The predetermined overhead rate is calculated as follows:

Predetermined overhead rate = Estimated total manufacturing overhead cost / Estimated total machine-hours
Predetermined overhead rate = $230,800 / 28,850 machine-hours
Predetermined overhead rate = $8.00 per machine-hour

To calculate the total cost of Job P505, we need to add the direct materials, direct labor, and overhead costs.

Direct materials = $1,200
Direct labor = $6,600 ($22 x 300 hours)
Machine-hours = 950 (500 hours for setup and 450 hours for production)

Overhead cost = Predetermined overhead rate x Actual machine-hours
Overhead cost = $8.00 x 950 machine-hours
Overhead cost = $7,600

Total cost of Job P505 = Direct materials + Direct labor + Overhead cost
Total cost of Job P505 = $1,200 + $6,600 + $7,600
Total cost of Job P505 = $15,400

Therefore, the closest total cost is Option B: $9,940.

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