The Laresen Company uses the machine hour method of applying factory overhead to production. The budgeted factory overhead last year was $200,000, and there were 40,000 machine hours budgeted. Job 84 was started and completed during the period. Direct materials costing $900 were incurred. Twenty-five direct labor hours were worked at a cost of $350, and 40 machine hours were incurred. What was the cost of Job 84?

Question

Business

Anne Kelly

9 October, 12:28

The Laresen Company uses the machine hour method of applying factory overhead to production. The budgeted factory overhead last year was $200,000, and there were 40,000 machine hours budgeted. Job 84 was started and completed during the period. Direct materials costing $900 were incurred. Twenty-five direct labor hours were worked at a cost of $350, and 40 machine hours were incurred. What was the cost of Job 84?

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Jasper Alvarado · Answer 1

Total cost = $1,375

Explanation:

Giving the following information:

The budgeted factory overhead last year was $200,000, and there were 40,000 machine hours budgeted.

Job 84:

Direct materials = $900

direct labor hours = 25

Direct labor cost = $350.

First, we need to calculate the manufacturing overhead rate based on direct labor hours:

Estimated manufacturing overhead rate = total estimated overhead costs for the period / total amount of allocation base

Estimated manufacturing overhead rate = 200,000/40,000 = $5 per direct labor hour

Now, we can calculate the total cost:

Total cost = direct material + direct labor + allocated overhead

Total cost = 900 + 350 + 5*25 = $1,375