Your Company uses a predetermined overhead rate in applying overhead to producti

Question

Your Company uses a predetermined overhead rate in applying overhead to production orders on a labor cost basis in Department A and on a machine-hours basis in Department B At the beginning of the most recently completed year, the company made the following estimates: Dept. A Dept. B Direct labor cost..S56,000 S33,000 Manufacturing overhead... S67.200 S45,000 9,000 4,000 15,000 Direct labor-hours Machine-hours 8,000 The Johnson job used 300 machine hours and incurred $5,000 of labor costs. What was the total overhead applied to this job?

Explanation / Answer

Calculate total overhead applied to this job :

Department A overhead rate = 67200*100/56000 = 120%

Department B Overhead rate = 45000/15000 = 3 per machine hour

Total overhead applied = (300*3+5000*120%) = 6900

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