Arabica Manufacturing Company uses a predetermined manufacturing overhead rate based on a percentage of direct labor cost. At the beginning of 2012, they estimated total manufacturing overhead costs at $1,050,000, and they estimated total direct labor costs at $840,000. In June, 2012, Arabica completed job number 511. Job stats are as follows:
$$\begin{array} { l l }
\text { Direct materials cost } & \$ 27,500 \
\text { Direct labor cost } & \$ 13,000 \
\text { Direct labor hours } & 400 \text { hours } \
\text { Units of product produced: } & 200 \text { crates }
\end{array}$$
-
How much was the total job cost?

Question

Arabica Manufacturing Company uses a predetermined manufacturing overhead rate based on a percentage of direct labor cost. At the beginning of 2012, they estimated total manufacturing overhead costs at $1,050,000, and they estimated total direct labor costs at $840,000. In June, 2012, Arabica completed job number 511. Job stats are as follows:
$$\begin{array} { l l } 
\text { Direct materials cost } & \$ 27,500 \
\text { Direct labor cost } & \$ 13,000 \
\text { Direct labor hours } & 400 \text { hours } \
\text { Units of product produced: } & 200 \text { crates }
\end{array}$$
- 
How much was the total job cost?

Quizplus · Accepted Answer

The predetermined overhead rate is calculated as $1,050,000 / $840,000 = 125% of direct labor cost. For job 511, the overhead is 125% of $13,000, which is $16,250. The total job cost is direct materials ($27,500) + direct labor ($13,000) + overhead ($16,250) = $56,750.

Arabica Manufacturing Company Uses a Predetermined Manufacturing Overhead Rate Based