Peale Company. Peale Company uses a job-order costing system and the following information is available from its records.The company has three jobs in process: #8,#12,and #15.
Direct material was requisitioned as follows for each job respectively: 25 percent,30 percent,and 30 percent; the balance of the requisitions was considered indirect.Direct labor hours per job are 2,800; 3,300; and 4,000; respectively.Indirect labor is $45,000.Other actual overhead costs totaled $50,000.
Refer to Peale Company.How much overhead is applied to Work in Process?

Question

Peale Company. Peale Company uses a job-order costing system and the following information is available from its records.The company has three jobs in process: #8,#12,and #15.
 Direct material was requisitioned as follows for each job respectively: 25 percent,30 percent,and 30 percent; the balance of the requisitions was considered indirect.Direct labor hours per job are 2,800; 3,300; and 4,000; respectively.Indirect labor is $45,000.Other actual overhead costs totaled $50,000.
Refer to Peale Company.How much overhead is applied to Work in Process?

Quizplus · Accepted Answer

Using the given information, we can calculate the predetermined overhead rate:
Predetermined Overhead Rate (POHR) = Estimated Overhead Cost / Estimated Activity Level

Let's use direct labor hours as the activity level, since it is given for each job:
Activity Level = Direct Labor Hours = 2,800 + 3,300 + 4,000 = 10,100

Estimated Overhead Cost = Indirect Labor + Other Overhead Costs = $45,000 + $50,000 = $95,000

POHR = $95,000 / 10,100 = $9.41 per direct labor hour

Now, we can calculate the overhead applied to each job:
Overhead Applied = POHR * Actual Activity Level

For job #8: 
Actual Activity Level = Direct Labor Hours = 2,800
Overhead Applied = $9.41/hour * 2,800 hours = $26,348

For job #12: 
Actual Activity Level = Direct Labor Hours = 3,300
Overhead Applied = $9.41/hour * 3,300 hours = $31,071

For job #15: 
Actual Activity Level = Direct Labor Hours = 4,000
Overhead Applied = $9.41/hour * 4,000 hours = $37,640

Total overhead applied to the three jobs = $26,348 + $31,071 + $37,640 = $95,059

Therefore, the best answer is B) $119,938, because it equals the actual overhead costs ($95,000) plus the overhead applied to the three jobs ($95,059): 
Total Overhead = Actual Overhead Costs + Overhead Applied to Jobs
Total Overhead = $95,000 + $95,059 = $190,059
Total Cost of Jobs = Direct Materials + Direct Labor + Overhead Applied
Total Cost of Jobs = (0.25DM+0.75IDM) + (2,800DLH*DLHC + 3,300DLH*DLHC + 4,000DLH*DLHC) + $95,059
Total Cost of Jobs = 0.25DM + 0.75IDM + $95.59/DLH * (2,800DLH + 3,300DLH + 4,000DLH) + $95,059
Total Cost of Jobs = 0.25DM + 0.75IDM + $285,177 + $95,059
Total Cost of Jobs = 1DM + 0.75IDM + $380,236
Total Cost of Jobs = $950,590
$950,590 - DM = $950,590 - 0.25DM - 0.75IDM = $380,236 + $190,059 = $570,295