Arabica Manufacturing uses a predetermined overhead allocation rate based on a percentage of direct labor cost. At the beginning of 2015, Arabica estimated total manufacturing overhead costs at $1,050,000 and total direct labor costs at $840,000. In June, 2015, Arabica completed Job 511. Job stats are as follows: $$\begin{array} { | l | r | }
\hline \text { Direct materials cost } & \$ 27,500 \
\hline \text { Direct labor cost } & \$ 13,000 \
\hline \text { Direct labor hours } & 400 \text { hours } \
\hline \text { Units of product produced } & 200 \
\hline
\end{array}$$ How much was the total job cost of Job 511?

Question

Arabica Manufacturing uses a predetermined overhead allocation rate based on a percentage of direct labor cost. At the beginning of 2015, Arabica estimated total manufacturing overhead costs at $1,050,000 and total direct labor costs at $840,000. In June, 2015, Arabica completed Job 511. Job stats are as follows: $$\begin{array} { | l | r | } 
\hline \text { Direct materials cost } & \$ 27,500 \
\hline \text { Direct labor cost } & \$ 13,000 \
\hline \text { Direct labor hours } & 400 \text { hours } \
\hline \text { Units of product produced } & 200 \
\hline
\end{array}$$ How much was the total job cost of Job 511?

Quizplus · Accepted Answer

First, we need to calculate the predetermined overhead rate using the given information:
$$Predetermined\ overhead\ rate = \dfrac{Total\ manufacturing\ overhead\ cost}{Total\ direct\ labor\ cost} = \dfrac{\$1,050,000}{\$840,000} = 1.25$$
This means that for every $1 of direct labor cost, $1.25 of overhead cost is allocated.

Next, we can calculate the total overhead cost allocated to Job 511:
$$Total\ overhead\ cost = Predetermined\ overhead\ rate \times Direct\ labor\ cost$$
$$Total\ overhead\ cost = 1.25 \times \$13,000 = \$16,250$$

Finally, we can calculate the total job cost of Job 511:
$$Total\ job\ cost = Direct\ materials\ cost + Direct\ labor\ cost + Total\ overhead\ cost$$
$$Total\ job\ cost = \$27,500 + \$13,000 + \$16,250 = \$56,750$$

Therefore, the answer is Choice B.

Arabica Manufacturing Uses a Predetermined Overhead Allocation Rate Based on a Percentage