Question

Parker Corporation uses a job-order costing system and applies manufacturing overhead to jobs using a predetermined overhead rate based on direct labor-hours. Last year manufacturing overhead and direct labor-hours were estimated at $80,910 and 27,900 hours, respectively, for the year. In June, Job #461 was completed. Materials costs on the job totaled $4,400 and labor costs totaled $1,836 at $5.40 per hour. At the end of the year, it was determined that the company worked 34,400 direct labor-hours for the year and incurred $89,760 in actual manufacturing overhead costs. Required: a. Job #461 contained 100 units. Determine the unit product cost that would appear on the job cost sheet. Unit product cost b. Determine the underapplied or overapplied overhead for the year.

Answer 1

Answers

• Working
  >Predetermined overhead rate = $ 80910 / 27900 hours = $ 2.9 per DLhs
  >DLHs for Job 461 = $ 1836 / 5.40 = 340 DLHs
• Requirement [a]
  Unit Product Cost = [ $4400 material + $ 1836 + (340 DLHs x $ 2.90)] / 100 units
  = (4400 + 1836 + 986) / 100
  = $ 72.722
• Requirement [b]
  >Applied overhead = 34400 DLhs x $ 2.90 = $ 99,760
  >Actual overhead = $ 89,760
  >Applied overhead is MORE than actual = OVER-APPLIED

OVER-APPLIED overhead by $ 10,000 [99760 – 89760]