Wunder Builders estimates the following overhead costs for 2017: $\begin{array}{lr}
\text { Equipment depreciation } & \$ 30,000 \
\text { Equipment maintenance } & 64,000 \
\text { Factory management salaries } & 150,000 \
\text { Factory rent } & 50,000 \
\text { Total manufacturing overhead } & \$ 294,000
\end{array}$
$\text { Wunder Builders incurred the following costs for } 2017 \text { for job } 23 \text { : }$
$\begin{array}{ll}
\text { Direct material } & \$ 80,000 \
\text { Direct labor } & \$ 60,000
\end{array}$ Wunder applies manufacturing overhead based on direct labor cost.Other jobs incurred $320,000 of direct labor.Wunder Builders budgeted $350,000 in direct labor costs and 20,000 machine hours for 2017.Actual manufacturing overhead for 2017 was $300,000.How much overhead will Wunder Builders apply to job 23?

Question

Quizplus · Accepted Answer

The overhead application rate is calculated based on the budgeted overhead costs divided by the budgeted direct labor costs. Therefore, the rate is $\frac{\$294,000}{\$350,000} = 0.84$ or 84%. For job 23, with direct labor costs of \$60,000, the applied overhead is $0.84 \times \$60,000 = \$50,400$.

Wunder Builders Estimates the Following Overhead Costs for 2017 Wunder Builders incurred the following costs for 2017 for job 23 : \text { Wunder Builders incurred the following costs for } 2017 \text { for job } 23 \text { : } Wunder Builders incurred the following costs for 2017 for job 23 :

Wunder Builders Estimates the Following Overhead Costs for 2017 $\text { Wunder Builders incurred the following costs for } 2017 \text { for job } 23 \text { : }$