Direct Direct Direct Materials Labour Cost Labour Hours
Job 200 $ 500 $800 40
Job 201 350 200 10
Job 202 1,000 600 30
Franks Fabricating uses job costing and applies overhead using a normal costing system and uses direct labour cost as the allocation base. This period's estimated overhead cost is $100,000 and estimated direct labour cost of $50,000 and 2,500 direct labour hours.
What is the total manufacturing cost of Job 201?

Question

Quizplus · Accepted Answer

To calculate the total manufacturing cost of Job 201, we need to add the direct materials, direct labour, and overhead costs. 
Direct materials cost for Job 201 is $350, direct labour cost is $200, and since overhead is applied using direct labour cost as the allocation base, we can calculate the overhead cost as follows: 
Overhead rate = Estimated overhead cost / Estimated direct labour cost 
Overhead rate = $100,000 / $50,000 = $2 per dollar of direct labour cost 
Overhead cost for Job 201 = Direct labour cost x Overhead rate 
Overhead cost for Job 201 = $200 x $2 = $400 
Total manufacturing cost of Job 201 = Direct materials + Direct labour + Overhead 
Total manufacturing cost of Job 201 = $350 + $200 + $400 = $950. Therefore, the option is B.