Degiman manufacturing uses a job order cost system and applies overhead to produ

Question

Degiman manufacturing uses a job order cost system and applies overhead to production on the basis of direct labor costs. On January 1, 2012 job no.50 was the only job in process. the costs incurred prior to January 1 on this job were follows: direct materials $25,800, direct labor 415,480, and manufacturing overhead $20,640. As of January 1, job no. 49 has been completed at a cost of $116,100 and was part of finished goods inventory. There was a $19, 350 balance in the raw materials inventory account. During the month of January, degiman manufacturing began production on jobss1 and s2, and completed jobs 50 and 51. jobs 49 and 50 were also sold on account during the month for $157,380 and $203,820 respectively. The following additional events occurred during the month purchased additional raw materials $116,100 on account Incurred factory labor costs of $90,3000. of this amount $20640 related to employee payroll taxes. Incurred manufacturing overhead costs as follows: indirect materials $21,930; indirect labor 425,800; depreciation expense on equipment $24,510; and various other manufacturing overhead costs on account $20,640 Assigned direct materials and direct labor to jobs as follows.

Explanation / Answer

Predetermined overhead rate

= estimated manufacturing overhead cost / estimated direct labour cost

= $1264200 / $903000

= $1.40 per dollar of direct labour cost

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