The following information is available pertaining to the Production Division of
ID: 2556755 • Letter: T
Question
The following information is available pertaining to the Production Division of Clarkson Enterprises:
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Assembly Dept.
Finishing Dept.
Total
Overhead costs
$7,500
$22,500
$30,000
Direct labor hours
7,500
2,500
10,000
Machine hours
2,500
7,500
10,000
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?
?
?
Production information pertaining to Job 4X5:
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?
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Assembly Dept.
Finishing Dept.
Total
Prime costs
$1,250
$0
$1,250
Direct labor hours
250
0
250
Machine hours
0
0
0
Units produced
500
0
500
?
Using the plantwide overhead rate based on direct labor hours what is the cost of Job 4X5?
$2,000
$8,750
$31,250
$1,250
?
Assembly Dept.
Finishing Dept.
Total
Overhead costs
$7,500
$22,500
$30,000
Direct labor hours
7,500
2,500
10,000
Machine hours
2,500
7,500
10,000
?
?
?
?
Production information pertaining to Job 4X5:
?
?
?
?
?
?
Assembly Dept.
Finishing Dept.
Total
Prime costs
$1,250
$0
$1,250
Direct labor hours
250
0
250
Machine hours
0
0
0
Units produced
500
0
500
Explanation / Answer
plantwide overhead rate = Total Overhead costs / total Direct labor Hours
= $ 30,000 /10,000
= $ 3 per direct labor hour
Overhead Allocated to Job 4X5 = plantwide overhead rate * Direct Labor Hours
= $ 3 per direct labor hour * 250 direct labor hours
= $ 750
The cost of Job 4X5=
Prime + Overhead
= $ 1,250 + $ 750
= $ 2,000
Hence the correct answer is a. $ 2,000
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