Boxer Industries worked on four jobs during its ﬁrst year of operation: nos.401, 402, 403, and 404. A review of job no.403's cost record revealed direct material charges of $40,000 and total manufacturing costs of $50,000.If Boxer applies overhead at 150% of direct labor cost, the overhead applied to job no.403 must have been:
A)$0.
B)$6,000.
C)$4,000.
D)$3,333.
E)$5,000.

Question

Quizplus · Accepted Answer

To find the overhead applied to job no. 403, we need to know the direct labor cost first. It is not given in the problem, so we need to use the manufacturing costs to estimate it.

Let's assume that the direct labor cost is 50% of the total manufacturing costs. Then we have:

Direct labor cost = 50% x $50,000 = $25,000

Now we can calculate the overhead applied to job no. 403:

Overhead applied = 150% x $25,000 = $37,500

However, we need to remember that overhead is applied based on a predetermined rate, not the actual cost incurred. In this problem, the predetermined rate is not given, so we cannot calculate the exact overhead applied.

Instead, we can use the information given in the answer choices to estimate the overhead applied. Choice B) $6,000 is the closest to our calculated amount ($37,500/6 = $6,250), so it is the best choice.

Boxer Industries Worked on Four Jobs During Its ﬁRst Year