Irene Manufacturing uses a predetermined overhead allocation rate based on a percentage of direct labor cost.At the beginning of the year,the company estimated total manufacturing overhead costs at $1,000,000 and total direct labor costs at $820,000.In June,Job 711 was completed.The details of Job 711 are shown below. $$\begin{array} { | l | r | }
\hline \text { Direct materials cost } & \$ 20,500 \
\hline \text { Direct labor cost } & \$ 11,000 \
\hline \text { Direct labor hours } & 500 \text { hours } \
\hline \text { Units of product produced } & 200 \text { units } \
\hline
\end{array}$$
How much was the cost per unit of finished product? (Round any percentages to two decimal places and your final answer to the nearest cent.)

Question

Irene Manufacturing uses a predetermined overhead allocation rate based on a percentage of direct labor cost.At the beginning of the year,the company estimated total manufacturing overhead costs at $1,000,000 and total direct labor costs at $820,000.In June,Job 711 was completed.The details of Job 711 are shown below. $$\begin{array} { | l | r | } 
\hline \text { Direct materials cost } & \$ 20,500 \
\hline \text { Direct labor cost } & \$ 11,000 \
\hline \text { Direct labor hours } & 500 \text { hours } \
\hline \text { Units of product produced } & 200 \text { units } \
\hline
\end{array}$$ 
How much was the cost per unit of finished product? (Round any percentages to two decimal places and your final answer to the nearest cent.)

Quizplus · Accepted Answer

The predetermined overhead rate is calculated as $1,000,000 / $820,000 = 1.2195 or 121.95% of direct labor cost. For Job 711, the overhead allocated is $11,000 * 1.2195 = $13,414.50. The total cost for Job 711 is $20,500 (materials) + $11,000 (labor) + $13,414.50 (overhead) = $44,914.50. The cost per unit is $44,914.50 / 200 units = $224.57, rounded to $224.60.

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