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:
A) $270
B) $1,380
C) $825
D) $555

Question

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) = $90,000 + ($3.70 per direct labor-hour × 50,000 direct labor-hours) = $90,000 + $185,000 = $275,000
Predetermined overhead rate = Estimated total manufacturing overhead cost ÷ Estimated total amount of the allocation base = $275,000 ÷ 50,000 direct labor-hours = $5.50 per direct labor-hour
Overhead applied to a particular job = Predetermined overhead rate x Amount of the allocation base incurred by the job = $5.50 per direct labor-hour × 150 direct labor-hours = $825

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