Landow Industries uses a job-order cost system. The company applies manufacturin

Question

Landow Industries uses a job-order cost system. The company applies manufacturing overhead to jobs using a predetermined overhead rate based on direct labor hours. The estimated MOH was $136,000 for the year and the estimated direct labor hours were 16,000 hours. In June, Job # 325 was completed. Direct materials totaled $5,700. Total labor costs were $3,600 at $12 per hour. At the end of the year, it was determined that the company worked 15,000 direct labor hours for the year, and incurred $133,000 in actual manufacturing overhead costs. Required: a- Calculate the predetermined overhead rate for year. b- Determine the amount of overhead charged to jobs during the year. c- Determine the amount of under- or over-applied overhead for the year. d- Prepare a job cost sheet for Job # 325 using information given. Assuming that 80 units were completed, determine the unit product cost.

Explanation / Answer

PDOR = Predetermined overhead rate ------------ a) PDOR is ( $80,000 / 16,000 ) = $5 per direct labor-hour b) Hours worked for year = 15,000 Overhead applied using PDOR = ( 15,000 x $5 ) = $ 75,000 c) Actual overhead was $ 78,000 So overhead was underapplied by ( $78,000 - $75,000 ) = $ 3,000 -------------------------- I don't quite see where the information about the specific Job #315 is used. That seems to be extra information; the questions a), b), c) don't ask specifically about that job.

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