Horatio Ltd. uses job order costing to measure and track product costs. Horatio has determined that machine hours drive its manufacturing overhead costs. During the month of June, the following data were available for Product #95: If total manufacturing overhead costs during the month totaled $10,000 when a total of 25,000 machine hours were used, what will be the total manufacturing cost of Product #95?

Question

Horatio Ltd. uses job order costing to measure and track product costs. Horatio has determined that machine hours drive its manufacturing overhead costs. During the month of June, the following data were available for Product #95:  If total manufacturing overhead costs during the month totaled $10,000 when a total of 25,000 machine hours were used, what will be the total manufacturing cost of Product #95?

Quizplus · Accepted Answer

First, we need to calculate the overhead rate per machine hour:
Overhead rate = Total manufacturing overhead costs / Total machine hours used
Overhead rate = $10,000 / 25,000 machine hours
Overhead rate = $0.40 per machine hour

Next, we can calculate the manufacturing overhead cost for Product #95:
Manufacturing overhead cost for Product #95 = Machine hours used for Product #95 * Overhead rate per machine hour
Manufacturing overhead cost for Product #95 = 1,750 machine hours * $0.40 per machine hour
Manufacturing overhead cost for Product #95 = $700

Finally, we can calculate the total manufacturing cost for Product #95 by adding the direct materials cost, direct labor cost, and manufacturing overhead cost:
Total manufacturing cost for Product #95 = Direct materials cost + Direct labor cost + Manufacturing overhead cost for Product #95
Total manufacturing cost for Product #95 = $3,000 + $1,200 + $700
Total manufacturing cost for Product #95 = $4,900

Therefore, the correct answer is C) $4,900.