The 195 Factory produces replacement parts and assemblies for vintage Cessna aircraft. The company's current costing system traces direct material and direct labor costs into individual jobs and assigns overhead costs to jobs using a predetermined overhead rate based on direct labor hours required by the job. All direct labor is paid at the same rate of $30 per hour.
- This year's overhead rate is based on estimated total overhead on $2,000,000 and 10,000 direct labor hours. Two jobs are currently complete and ready for delivery to the customer. One is a wing assembly that required raw material costing $5,000 and consumed 40 hours of direct labor time. The other is a wheel strut that required raw materials of $2,000 and consumed 20 hours of direct labor time. Under the current cost system, what amount of overhead will be charged to the wing assembly job?
A) $8,000
B) $4,000
C) $1,200
D) $1,000,000

Question

Quizplus · Accepted Answer

The predetermined overhead rate is calculated as total estimated overhead ($2,000,000) divided by total estimated direct labor hours (10,000), which equals $200 per direct labor hour. The wing assembly job used 40 direct labor hours, so the overhead charged is 40 hours * $200/hour = $8,000.

The 195 Factory Produces Replacement Parts and Assemblies for Vintage