Moran Company uses a job order cost system and has established a predetermined overhead application rate for the current year of 150% of direct labor cost,based on budgeted overhead of $900,000 and budgeted direct labor cost of $600,000.Job No.1 was charged with direct materials of $36,000 and with overhead of $27,000.What is the total cost of Job No.1?
A)$64,000
B)$81,000
C)$91,000
D)Cannot be determined without additional information.

Question

Quizplus · Accepted Answer

The total cost of Job No. 1 can be calculated as follows:

Direct labor cost = $x (not given)
Overhead cost = 150% of direct labor cost
Overhead cost = 1.5x

Total manufacturing cost = Direct materials cost + Direct labor cost + Overhead cost
Total manufacturing cost = $36,000 + $x + $1.5x
Total manufacturing cost = $36,000 + $2.5x

Given that Job No. 1 was charged with overhead of $27,000:
$27,000 = 1.5x
x = $18,000

Therefore, the total cost of Job No. 1 is:
Total manufacturing cost = $36,000 + $18,000 + $27,000
Total manufacturing cost = $81,000

Option B is the correct answer.

Moran Company Uses a Job Order Cost System and Has