The following information is available pertaining to the Production Division of Clarkson Enterprises: $\begin{array} { l c c c } & \text { Assembly Dept. } & \text { Finishing Dept. } & \text { Total } \ \text { Overhead costs } & \$ 7,500 & \$ 22,500 & \$ 30,000 \ \text { Direct labor hours } & 7,500 & 2,500 & 10,000 \ \text { Machine hours } & 2,500 & 7,500 & 10,000 \end{array}$
Production information pertaining to Job 4X5:
$\begin{array}{lrrr}
&\text { Assembly Dept. }& \text { Finishing Dept. } &\text { Total }\
\text { Prime costs } & \$ 1,250 & \$ 0 & \$ 1,250 \
\text { Direct labor hours } & 250 & 0 & 250 \
\text { Machine hours } & 0 & 0 & 0\
\text { Units produced }&500&0&500
\end{array}$
Using the plantwide overhead rate based on direct labor hours what is the cost of Job 4X5?
A)$1,250
B)$2,000
C)$8,750
D)$31,250

Question

Quizplus · Accepted Answer

The plantwide overhead rate is calculated using total overhead costs divided by total direct labor hours, which equals $30,000 / 10,000 hours = $3 per direct labor hour. For Job 4X5, with 250 direct labor hours, the overhead cost is 250 hours * $3/hour = $750. Adding the prime costs of $1,250 to the overhead cost of $750 gives a total cost of $2,000 for Job 4X5.

The Following Information Is Available Pertaining to the Production Division