Question

Exercise 2-9 (Algo) Job-Order Costing and Decision Making [LO2-1, LO2-2, LO2-3]

Taveras Corporation is currently operating at 50% of its available manufacturing capacity. It uses a job-order costing system with a plantwide predetermined overhead rate based on machine-hours. At the beginning of the year, the company made the following estimates:

Machine-hours required to support estimated production		250,000
Fixed manufacturing overhead cost	$	6,000,000
Variable manufacturing overhead cost per machine-hour	$	2.00

Required:

1. Compute the plantwide predetermined overhead rate.

2. During the year, Job P90 was started, completed, and sold to the customer for $4,200. The following information was available with respect to this job:

Direct materials	$	1,932
Direct labor cost	$	1,386
Machine-hours used		89

Compute the total manufacturing cost assigned to Job P90.

Required 1: Compute the plantwide predetermined overhead rate.

Required 2: Compute the total manufacturing cost assigned to Job P90.

Answer 1

1.

Estimated machine hours = 250,000

Estimated fixed manufacturing overhead = $6,000,000

Variable manufacturing overhead = $2 per machine hours

Predetermined overhead rate = Variable manufacturing overhead + Estimated fixed manufacturing overhead/Estimated machine hours

= 2+ 6,000,000/250,000

= 2+24

= $26 per machine hour

The plantwide predetermined overhead rate is $26

2.

Total machine hours used = 89

Overhead applied to Job P90 = Total machine hours used x Predetermined overhead rate

= 89 x 26

= $2,314

Job Cost Sheet (Job P90)
Direct materials	1,932
Direct labor cost	1,386
Overhead applied	2,314
Total Cost	$5,632

The total manufacturing cost assigned to Job P90 = $5,632

Kindly comment if you need further assistance. Thanks