Horatio Ltd.uses job order costing to measure and track product costs.Horatio has determined that machine hours drive its manufacturing overhead costs.During the month of June,the following data were available for Product #80:
$$\begin{array} { l l }
\text { Direct labour } & 350 \text { hours at } \$ 10 \text { per hour } \
\text { Direct materials } & 40 \text { square yards at } \$ 25 \text { per yard }\
\text { Machine hours usedd }&1000\text{hour}
\end{array}$$
If total manufacturing overhead costs during the month totalled $10 000 when a total of 25 000 machine hours were used,what will be the total manufacturing cost of Product #80?

Question

Horatio Ltd.uses job order costing to measure and track product costs.Horatio has determined that machine hours drive its manufacturing overhead costs.During the month of June,the following data were available for Product #80:
$$\begin{array} { l l } 
\text { Direct labour } & 350 \text { hours at } \$ 10 \text { per hour } \
\text { Direct materials } & 40 \text { square yards at } \$ 25 \text { per yard }\
\text { Machine hours usedd }&1000\text{hour}
\end{array}$$
If total manufacturing overhead costs during the month totalled $10 000 when a total of 25 000 machine hours were used,what will be the total manufacturing cost of Product #80?

Quizplus · Accepted Answer

First, calculate the overhead rate per machine hour: $10,000 total overhead / 25,000 machine hours = $0.40 per machine hour. For Product #80: Direct labor = 350 hours * $10/hour = $3,500. Direct materials = 40 yards * $25/yard = $1,000. Overhead = 1000 hours * $0.40/hour = $400. Total manufacturing cost = $3,500 + $1,000 + $400 = $4,900.

Horatio Ltd If Total Manufacturing Overhead Costs During the Month Totalled $10