Question

Coronado Company uses a job order cost system and applies overhead to production on the basis of direct labor costs. On Janu 1, 2020, Job 50 was the only job in process. The costs incurred prior to January 1 on this job were as follows: direct materials $24.000, direct labor $14,400, and manufacturing overhead $19,200. As of January 1, Job 49 had been completed at a cost of $108,000 and was part of finished goods inventory. There was a $18,000 balance in the Raw Materials Inventory account. During the month of January, Coronado Company began production on Jobs 51 and 52, and completed Jobs 50 and 51. Jobs 49 50 were also sold on account during the month for $146,400 and $189,600, respectively. The following additional events occur during the month Purchased additional raw materials of $108,000 on account 2 Incurred factory labor costs of $84,000. Of this amount $19,200 related to employer payroll taxes. 3 Incurred manufacturing overhead costs as follows: indirect materials $20,400; indirect labor $24,000; depreciation expense on equipment $14,400; and various other manufacturing overhead costs on account $19,200. 4. Assigned direct materials and direct labor to jobs as follows. 1. Job No. 50 51 52 Direct Materials $12,000 46,800 36,000 Direct Labor $6,000 30,000 24,000

Answer 1

Estimated total manufacturing overhead = $1,008,000

Estimated total direct labor cost = $840,000

Predetermined overhead rate = Estimated total manufacturing overhead / Estimated total direct labor cost

= 1,008,000/840,000

= 120% of direct labor cost

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