Irene Manufacturing uses a predetermined overhead allocation rate based on direct labor cost. At the beginning of the year, the company estimated total manufacturing overhead costs at $1,020,000 and total direct labor costs at $820,000. In June, Job 711 was completed. The details of Job 711 are shown below. $$\begin{array} { | l | r | }
\hline \text { Direct materials cost } & \$ 21,500 \
\hline \text { Direct labor cost } & \$ 10,000 \
\hline \text { Direct labor hours } & 400 \text { hours } \
\hline \text { Units of product produced } & 200 \text { units } \
\hline
\end{array}$$ How much was the cost per unit of finished product? (Round any percentages to two decimal places and your final answer to the nearest cent.)

Question

Irene Manufacturing uses a predetermined overhead allocation rate based on direct labor cost. At the beginning of the year, the company estimated total manufacturing overhead costs at $1,020,000 and total direct labor costs at $820,000. In June, Job 711 was completed. The details of Job 711 are shown below. $$\begin{array} { | l | r | } 
\hline \text { Direct materials cost } & \$ 21,500 \
\hline \text { Direct labor cost } & \$ 10,000 \
\hline \text { Direct labor hours } & 400 \text { hours } \
\hline \text { Units of product produced } & 200 \text { units } \
\hline
\end{array}$$ How much was the cost per unit of finished product? (Round any percentages to two decimal places and your final answer to the nearest cent.)

Quizplus · Accepted Answer

The predetermined overhead rate is calculated as $1,020,000 / $820,000 = 1.2439 or 124.39%. The overhead allocated to Job 711 is $10,000 * 1.2439 = $12,439. The total cost for Job 711 is $21,500 (materials) + $10,000 (labor) + $12,439 (overhead) = $43,939. The cost per unit is $43,939 / 200 units = $219.70.

Irene Manufacturing Uses a Predetermined Overhead Allocation Rate Based on Direct