Levron Corporation uses a job-order costing system with a single plantwide predetermined overhead rate based on machine-hours. The company based its predetermined overhead rate for the current year on total fixed manufacturing overhead cost of $58,000, variable manufacturing overhead of $2.00 per machine-hour, and 20,000 machine-hours. The company has provided the following data concerning Job P978 which was recently completed:

-The amount of overhead applied to Job P978 is closest to:
A) $232
B) $160
C) $392
D) $552

Question

Levron Corporation uses a job-order costing system with a single plantwide predetermined overhead rate based on machine-hours. The company based its predetermined overhead rate for the current year on total fixed manufacturing overhead cost of $58,000, variable manufacturing overhead of $2.00 per machine-hour, and 20,000 machine-hours. The company has provided the following data concerning Job P978 which was recently completed:
 
-The amount of overhead applied to Job P978 is closest to:
A) $232 
B) $160 
C) $392 
D) $552

Quizplus · Accepted Answer

Estimated total manufacturing overhead cost = Estimated total fixed manufacturing overhead cost + (Estimated variable overhead cost per unit of the allocation base × Estimated total amount of the allocation base) = $58,000 + ($2.00 per machine-hour × 20,000 machine-hours) = $58,000 + $40,000 = $98,000
Predetermined overhead rate = Estimated total manufacturing overhead cost ÷ Estimated total amount of the allocation base = $98,000 ÷ 20,000 machine-hours = $4.90 per machine-hour
Overhead applied to a particular job = Predetermined overhead rate x Amount of the allocation base incurred by the job = $4.90 per machine-hour × 80 machine-hours = $392

Levron Corporation Uses a Job-Order Costing System with a Single