Kubes 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 $3.50 per direct labor-hour, and 30,000 direct labor-hours. The company has provided the following data concerning Job A477 which was recently completed:

-The total amount of overhead applied in both departments to Job T288 is closest to:
A) $508
B) $672
C) $1,688
D) $1,180

Question

Kubes 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 $3.50 per direct labor-hour, and 30,000 direct labor-hours. The company has provided the following data concerning Job A477 which was recently completed:
 
-The total amount of overhead applied in both departments to Job T288 is closest to:
A) $508 
B) $672 
C) $1,688 
D) $1,180

Quizplus · Accepted Answer

Forming Department overhead cost = Fixed manufacturing overhead cost + (Variable overhead cost per machine-hour × Total machine-hours in the department)
= $129,200 + ($1.60 per machine-hour × 19,000 machine-hours)
= $129,200 +$30,400 = $159,600
Predetermined overhead rate = Estimated total manufacturing overhead cost ÷ Estimated total amount of the allocation base incurred = $159,600 ÷ 19,000 machine-hours = $8.40 per machine-hour
Overhead applied to a particular job = Predetermined overhead rate × Amount of the allocation base incurred by the job = $8.40 per machine-hour × 80 machine-hours = $672
Assembly Department overhead cost = Fixed manufacturing overhead cost + (Variable overhead cost per direct labor-hour × Total direct labor-hours in the department)
= $77,600 + ($3.00 per direct labor-hour × 8,000 direct labor-hours)
= $77,600 + $24,000 = $101,600
Predetermined overhead rate = Estimated total manufacturing overhead cost ÷ Estimated total amount of the allocation base incurred = $101,600 ÷8,000 direct labor-hours = $12.70 per direct labor-hour
Overhead applied to a particular job = Predetermined overhead rate × Amount of the allocation base incurred by the job = $12.70 per direct labor-hour × 40 direct labor-hours = $508
Overhead applied to Job T288
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Kubes Corporation Uses a Job-Order Costing System with a Single