Webber Fabricating estimated the following annual cost. Expected annual direct l

Question

Webber Fabricating estimated the following annual cost. Expected annual direct labor hours. 40000 Expected annual direct labor cost. $625000 Expected machine hours. 20000 Expected material cost for the year. $800000 Expected manufacturing overhead. $1000000 A. Calculate overhead allocation rates using each of the four possible allocation bases provided. B. determine the cost of the following job (number 253) using each of the four overhead allocation rates. Job 253: Direct materials. $3000 Direct labor (150 hrs @ $12/hr). $1800 Machine hours used. 150 Can someone please help me understand this?

Explanation / Answer

based on 1) DL Hrs of 40,000,
2) DL Dollars of 625,000,

3) Machine hrs of 20,000, or 4) Material cost of 800,000.

The numerator, $1,000,000 of Mfg OH, is what we're trying to allocate, based on:
1) DL Hrs, $1.0 mil / 40,000 = $25.00 per DL Hr, or
2) DL Dollars, $1.0 mil / 625,000 = 160% of DL Dollars, or
3) Machine hrs, $1.0 mil / 20,000 = $50.00 per machine hr, or
4) Direct Material cost, $1.0 mil / $800,000 = 125% of DM cost

Direct materials = $3000
Direct labor (150 hrs @ $12/hr) = $1800
Machine hrs used = 150

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