Snappy Company has a job-order costing system and uses a predetermined overhead rate based on direct labor-hours to apply manufacturing overhead to jobs. Manufacturing overhead cost and direct labor hours were estimated at $100,000 and 40,000 hours, respectively, for the year. In July, Job #334 was completed at a cost of $5,000 in direct materials and $2,400 in direct labor. The labor rate is $6 per hour. By the end of the year, Snappy had worked a total of 45,000 direct labor-hours and had incurred $110,250 actual manufacturing overhead cost.
Snappy’s manufacturing overhead for the year was (do not round your intermediate calculations):
Answer : Snappy’s Manufacturing overhead cost for the year is $ 112,500
Explanation : In the sum information is given that “Snappy uses a predetermined overhead rate based on direct labor-hours to apply manufacturing overhead to jobs”
Predetermine over head is 100,000 and labour hour is 40,000 hrs so manufacturing overhead per hour is 2.5 (100,000/40,000)
Now Snappy had worked a total of 45,000 direct labor-hours so total Manufacturing overhead is 112,500 $ (45,000*2.5)
Calculation for the job #334 is as follow
Material 5,000 $
Add Labout 14,400 $
Direct Exp 19,400 $
Add Manufacuring
Overhead 6,000 $ (2.5*2400)
cost of #334 job 25,400 $ (5,000+14,400+6,000)
