Erickson Company made the following predictions for the current year:
$$\begin{array} { l r }
\text { Factory averhead costs } & \text {\$ 300,000 } \
\text { Direct labour hours } & 50,000 \text { hours } \
\text { Machine hours } & 100,00 \text { hours }
\end{array}$$ Job A2 (which was started and completed in May)used 3,000 direct labour hours,2,000 machine hours,and $57,000 of prime costs.
-Refer to the figure.If factory overhead is applied based on machine hours,what is the cost of Job A2 for the Erickson Company?
A)$63,000
B)$66,000
C)$69,000
D)$75,000

Question

Erickson Company made the following predictions for the current year:
$$\begin{array} { l r } 
\text { Factory averhead costs } & \text {\$ 300,000 } \
\text { Direct labour hours } & 50,000 \text { hours } \
\text { Machine hours } & 100,00 \text { hours }
\end{array}$$ Job A2 (which was started and completed in May)used 3,000 direct labour hours,2,000 machine hours,and $57,000 of prime costs.
-Refer to the figure.If factory overhead is applied based on machine hours,what is the cost of Job A2 for the Erickson Company?
A)$63,000
B)$66,000
C)$69,000
D)$75,000

Quizplus · Accepted Answer

Factory overhead rate = $300,000 / 100,000 machine hours = $3 per machine hourCost of Job A2 = Prime costs + Factory overhead= $57,000 + (2,000 machine hours x $3 per machine hour)= $57,000 + $6,000= $63,000

Erickson Company Made the Following Predictions for the Current Year