A company has identified the following overhead costs and cost drivers for the coming year: (CIA adapted) Budgeted direct labor cost was $100,000 and budgeted direct material cost was $280,000.The following information was collected on three jobs that were completed during the year: If the company uses traditional costing and allocates overhead using direct labor cost,how much overhead cost should be assigned to Job 101?

Question

A company has identified the following overhead costs and cost drivers for the coming year: (CIA adapted)  Budgeted direct labor cost was $100,000 and budgeted direct material cost was $280,000.The following information was collected on three jobs that were completed during the year:  If the company uses traditional costing and allocates overhead using direct labor cost,how much overhead cost should be assigned to Job 101?

Quizplus · Accepted Answer

The traditional costing method assigns overhead based on the cost driver of direct labor cost. To calculate the predetermined overhead rate, we divide the total estimated overhead by the total estimated direct labor cost:

$150,000 / $100,000 = $1.50 per direct labor dollar

To allocate overhead to each job, we multiply the predetermined overhead rate by the actual amount of direct labor dollars used for each job. For Job 101, we have:

$1.50 x $4,000 = $6,000

Therefore, the amount of overhead cost assigned to Job 101 is $5,600, rounded to the nearest dollar. The correct answer is D.

A Company Has Identified the Following Overhead Costs and Cost