Question

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Group Problem 2 Predetermined Overhead Rate; Application of Overhead; Gersey Inc., which allocates all manufacturing overhead on the basis of direct labor cost, budgeted the following for the first quarter: Revenues Variable Costs: 1,200,000 Direct Materials Indirect Materials 100,000 20,000 250,000 15,000 80,000 120,000 24 Indirect Labor Other variable manufacturing overhead Direct Labor 585,000 Sales commission Fixed costs: Fixed manufacturing overhead Fixed selling and administrative costs 200,000 170,000 370,000 245,000 Income Job 418 used $20,000 in direct materials and $60,000 in direct labor. The job consisted of 389 units manufactured. Find the cost of Job 418,

Answer 1

The answer has been presented in the supporting sheet. All the parts has been solved with detailed explanation and calculation. For detailed answer refer to the supporting sheet.

Answer Cost sheet For job 418 Particular Direct Material Direct Labour manufacturing Overheads (1.26*60000) Total Job Cost No. of units Manufactured 1 Cost per unit manufactured for job 418 Amount 20000 60000 75600 155600 389 400 3 Notes 4 Manufacturing overhead rate 5 = (indirect material+ indirect labour + variable manufacturing overheads + fixed manufacturing overheads ) / direct labour cost 5 = ( 20000+15000+80000+200000)/250000 7 = $ 1.25 direct labour dollar 3 Sales commission and fixed selling expenses are not part of manufacturing cost, hence not included in the above cost sheet.