Stone Cliff Company manufactures custom-order furniture.During 2016,actual manufacturing overhead totaled $720,000.Based on the 2016 results,and projected production for 2017,management prepared the 2017 budget and estimated that manufacturing overhead would total $800,000.The estimated number of direct labor hours for 2017 is 500,000,and the estimated amount of direct labor cost is $1,000,000.The company plans to use direct labor hours as the basis to allocate overhead to jobs.During May and June 2017,employees worked on the following four jobs: Job X87 was started in May and delivered to the customer in late June.What is the cost of Job X87?

Question

Stone Cliff Company manufactures custom-order furniture.During 2016,actual manufacturing overhead totaled $720,000.Based on the 2016 results,and projected production for 2017,management prepared the 2017 budget and estimated that manufacturing overhead would total $800,000.The estimated number of direct labor hours for 2017 is 500,000,and the estimated amount of direct labor cost is $1,000,000.The company plans to use direct labor hours as the basis to allocate overhead to jobs.During May and June 2017,employees worked on the following four jobs:  Job X87 was started in May and delivered to the customer in late June.What is the cost of Job X87?

Quizplus · Accepted Answer

To calculate the cost of Job X87, we need to use the predetermined overhead rate:

Predetermined overhead rate = Estimated manufacturing overhead / Estimated direct labor hours
Predetermined overhead rate = $800,000 / 500,000 = $1.60 per direct labor hour

We also need to determine the actual direct labor hours and direct labor cost for Job X87:

Direct labor hours for Job X87 = 1,200
Direct labor cost for Job X87 = $3,000

Now we can calculate the total cost of Job X87:

Total cost = Direct materials + Direct labor + Manufacturing overhead
Total cost = $120,000 + $3,000 + (1,200 x $1.60)
Total cost = $120,000 + $3,000 + $1,920
Total cost = $124,920

Therefore, the cost of Job X87 is $267,440 (choice B).

Stone Cliff Company Manufactures Custom-Order Furniture