EX. 1 Granite Company uses a job order cost system. The company applies manufact

ID: 2546561 • Letter: E

Question

EX. 1 Granite Company uses a job order cost system. The company applies manufacturing overhead to jobs using a predetermined overhead rate based on direct labor-hours. hours respectively, for the year. totaled $2,400 at $6 per hour. the year, and incurred $78,000 in actual manufacturing overhead costs. Required a. Determine the predetermined overhead rate for the 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. Assuming that 100 units were completed, determine the unit product cost that would Last year, manufacturing overhead and direct labor-hours were estimated at $80,000 and 16,000 In June, Job #315 was completed. Materials costs on the job totaled $1,500 and labor costs At the end of the year, it was determined that the company worked 15,000 direct labor-hours for appear on the job cost sheet/or Job #315. 5 Pe D goooO 16000 - : 200 Appliod 750o 300o

Explanation / Answer

Predetermined overhead rate = Estimated total overhead cost/estimated labor hours

=$ 80,000/16,000 = $ 5 PDL

Direct labor hour worked for the year = 15,000

Overhead applied = Predetermined overhead rate x direct labor hour worked

= $ 5 x 15,000 = $ 75,000

Actual overhead cost incurred = $ 78,000

Applied overhead cost = $ 75,000

Under applied overhead cost = $ 78,000 - $ 75,000 = $ 3,000

Direct material

$ 1,500

Add: Direct labor

$ 2,400

Add: Overhead applied (400 x $ 5)

$ 2,000

Total cost for 100 units

$ 5,900

Unit cost

$ 59

No. of direct labor hours = Total labor cost/labor rate per hour = $ 2,400/$ 6 = 400 Hrs