Question

Hahn Company uses a job-order costing system. Its plantwide predetermined overhead rate uses direct labor-hours as the allocation base. The company pays its direct laborers $19.00 per hour. During the year, the company started and completed only two jobs-Job Alpha, which used 63,400 direct labor-hours, and Job Omega. The job cost sheets for the these two jobs are shown below: no fremover startet med Job Alpha Direct materials Direct labor Manufacturing overhead applied Total job cost $ 2,452,000 Job Omega Direct materials Direct labor Manufacturing overhead applied Total job cost $ 384,400 514,900 325, 200 $1,224,500 Required: 1. Calculate the plantwide predetermined overhead rate. 2. Complete the job cost sheet for Job Alpha.

Answer 1

Solution :

1.Calculation of plantwide predetermined overhead rate:

As per the information given in the question

Company wide Direct labor cost per unit = $ 19.00 per hour

The Direct labor cost of Job Omega = $ 514,900

Thus the No. of Direct labor hours of Omega = Direct labor cost of Job Omega / Direct labor cost per unit

= $ 514,900 / $ 19

= 27,100 labor hours

Thus the No. of Direct labor hours of Omega

We know that Manufacturing overhead cost using the plant wide predetermined overhead rate based on direct labor hours is calculated as follows

Manufacturing overhead applied = No. of Direct labor hours of Omega * predetermined overhead rate

As per the information given in the question we have

Manufacturing overhead applied for Job Omega = $ 325,200 ; No. of Direct labor hours of Omega = 27,100 ; predetermined overhead rate = To find

Applying the above information in the above formula we have

$ 325,200 = 27,100 * predetermined overhead rate

$ 325,200 / 27,100 = predetermined overhead rate

predetermined overhead rate = $ 325,200 / 27,100

predetermined overhead rate = $ 12 per direct labor hour

Thus the Predetermined overhead rate = $ 12 per direct labor hour

2.Job cost sheet of Job Alpha :

Calculation of Direct labor cost for Job Alpha :

As per the information given in the question :

Direct labor cost per unit = $ 19.00 per hour

Direct labor hours used by Job Alpha = 63,400 direct labor hours

Thus the Direct labor cost = Direct labor hours used * Direct labor cost per unit

= 63,400 * $ 19

= $ 1,204,600

Thus the Direct labor cost of alpha = $ 1,204,600

Calculation of Manufacturing overhead applied for Job Alpha :

The formula for calculating the Manufacturing overhead applied is

Manufacturing overhead applied = No. of Direct labor hours of Alpha * predetermined overhead rate

As per the information available we have

Direct labor hours used = 63,400 direct labor hours

predetermined overhead rate = $ 12 per direct labor hour

Applying the above information in the formula for Manufacturing overhead applied, we have

= 63,400 * $ 12

= $ 760,800

Thus the Manufacturing overhead applied – Job Alpha = $ 760,800

Calculation of Direct materials cost for Job Alpha :

We know that Total Job Cost = Direct materials + Direct Labor + Manufacturing overhead applied

As per the information available we have

Total Job Cost = $ 2,452,000 ; Direct Labor = $ 1,204,600   ;

Manufacturing overhead applied = $ 760,800 ; Direct materials = To find   ;

Applying the above information in the Total Job cost formula we have

$ 2,452,000 = Direct materials + $ 1,204,600 + $ 760,800

$ 2,452,000 = Direct materials + $ 1,965,400

$ 2,452,000 - $ 1,965,400 = Direct materials

Direct materials = $ 2,452,000 - $ 1,965,400

Direct materials = $ 486,600

Thus Direct materials of Alpha = $ 486,600

The completed Job Cost Sheet of Job Alpha is

Particulars	Amount
Direct Materials	$ 486,600
Direct Labor	$ 1,204,600
Manufacturing overhead applied	$ 760,800
Total Job Cost	$ 2,452,000