estimated manufacturing overhead question cost accounting need help tonight!, will give best rating, upvotes!

Question

The Turquoise Company uses predetermined overhead to apply manufacturing overhead to jobs. The predetermined overhead is based on labor cost in Department A and machine hours in Department B. At the beginning of the year , the company made the following estimates :

 

Department A

Direct Labor Cost : $65,000

Manufacturing Overhead : $91,000

Direct Labor Hours : 8,000

Machine Hours : 3,000

 

Department B

Direct Labor Cost : $42,000

Manufacturing Overhead : $48,000

Direct Labor Hours : 10,000

Machine Hours : 12,000

 

They recently received an order for a job from a company in Vermont . The expected cost of the job is :

 

Department A 

Direct Labor Cost : $7,000

Direct Labor Hours : 500

Machine Hours : 100

 

Department B :

Direct Labor Cost : $3,500

Direct Labor Hours : 600

Machine Hours : 435

 

Question : What is the estimated overhead cost for the job ?

 

A) $1,737.50 B) $5,038.75 C) $7,400 D) $11,540.00 E) None of above

 

Please show help with steps. Thanks.

Answer 1

Sagnik,

 

Fro department A overhead is based on Labor cost. For a labor cost of 65k the overhead is 91k. The new job has labor cost of 7k so the overhead will be 7000*91000/65000 = $9800

 

For Dept. B it is based on machine hours. 12k machine hours have an overhead of 48k, so 435 machine hours will have an overhead of 435*48000/12000 = $1740

 

Total overhead = 1740 + 9800 = $11,540