Lueckenhoff 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 $497,000, variable manufacturing overhead of $2.40 per direct labor-hour, and 70,000 direct labor-hours. The company has provided the following data concerning Job T498 which was recently completed:

-The unit product cost for Job T498 is closest to:
A) $55.38
B) $42.75
C) $91.75
D) $110.75

Question

Lueckenhoff 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 $497,000, variable manufacturing overhead of $2.40 per direct labor-hour, and 70,000 direct labor-hours. The company has provided the following data concerning Job T498 which was recently completed:
 
-The unit product cost for Job T498 is closest to:
A) $55.38 
B) $42.75 
C) $91.75 
D) $110.75

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) = $497,000 + ($2.40 per direct labor-hour × 70,000 direct labor-hours) = $497,000 + $168,000 = $665,000
Predetermined overhead rate = Estimated total manufacturing overhead cost ÷ Estimated total amount of the allocation base = $665,000 ÷ 70,000 direct labor-hours = $9.50 per direct labor-hour
Overhead applied to a particular job = Predetermined overhead rate x Amount of the allocation base incurred by the job = $9.50 per direct labor-hour × 80 direct labor-hours = $760
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Lueckenhoff Corporation Uses a Job-Order Costing System with a Single