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18 February, 16:00

Parker Corporation has a job-order costing system and uses a predetermined overhead rate based on direct labor-hours to apply manufacturing overhead to jobs. At the beginning of the year, manufacturing overhead and direct labor-hours for the year were estimated at $50,000 and 20,000 hours, respectively. In June, Job #461 was completed. Materials costs on the job totaled $4,000 and labor costs totaled $1,500 at $5 per hour. At the end of the year it was determined that the company worked 24,000 direct labor-hours for the year and incurred $54,000 in actual manufacturing overhead costs. If Job #461 contained 100 units, the unit product cost on the completed job cost sheet would be:

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  1. 18 February, 18:09
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    Unitary cost = $62.5

    Explanation:

    Giving the following information:

    Predetermined overhead rate based on direct labor-hours to apply manufacturing overhead to jobs. At the beginning of the year, manufacturing overhead and direct labor-hours for the year were estimated at $50,000 and 20,000 hours.

    Materials costs on the job totaled $4,000 and labor costs totaled $1,500 at $5 per hour.

    First, we need to determine the allocated MOH:

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

    Estimated manufacturing overhead rate = 50000/20000 = $2.5 per direct labor hour

    Allocated MOH = Estimated manufacturing overhead rate * Actual amount of allocation base = 2.5 * (1500/5) = $750

    Total cost = 4000 + 1500 + 750 = $6,250

    Unitary cost = 6250/100 = $62.5
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