$\begin{array}{lccc}&\text { Direct }&\text {Direct}&\text { Direct }\
&\text { Materials }&\text {Labour Cost }&\text {Labour Hours }\
\text { Job 200 } & \$ 500 & \$ 800 & 40 \
\text { Job 201 } & 350 & 200 & 10 \
\text { Job 202 } & 1,000 & 600 & 30
\end{array}$ Smith Fabricating uses job costing and applies overhead using a normal costing system and uses direct labour cost as the allocation base. This period's estimated overhead cost is $100,000 and estimated direct labour cost of $50,000 and 2,500 direct labour hours.
What is the total manufacturing cost of Job 201?
A) $550
B) $950
C) $850
D) $1,500

Question

Quizplus · Accepted Answer

First, calculate the predetermined overhead rate (POR) using the formula: $$POR = \frac{\text{Estimated Overhead Cost}}{\text{Estimated Direct Labour Cost}} = \frac{100,000}{50,000} = 2.$$ This means for every $1 of direct labour cost, $2 of overhead is applied. For Job 201, the direct labour cost is $200, so the applied overhead is $200 \times 2 = $400$. The total manufacturing cost of Job 201 is the sum of direct materials, direct labour, and applied overhead: $$350 + 200 + 400 = $950.$$

Smith Fabricating Uses Job Costing and Applies Overhead Using a }&\text