Ashland Corporation estimates its manufacturing overhead costs to be $160,000 and its direct labor costs to be $320,000 for 2016.The actual manufacturing labor costs were $80,000 for job 1,$120,000 for job 2 and $160,000 for job 3 during 2016.Manufacturing overhead is applied to jobs on the basis of direct labor costs using a predetermined overhead rate.The actual manufacturing overhead cost for the year was $172,000.The amount of overhead assigned to Job 3 during 2016 was:

Question

Quizplus · Accepted Answer

The predetermined overhead rate is calculated as estimated overhead costs divided by estimated direct labor costs, which is $160,000 / $320,000 = 0.5 or 50%. For Job 3, with actual direct labor costs of $160,000, the overhead assigned is 50% of $160,000, which is $80,000.

Ashland Corporation Estimates Its Manufacturing Overhead Costs to Be $160,000