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

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

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