 Business
1 December, 13:58

# Southern Rim Parts estimates its manufacturing overhead to be \$454,500 and its direct labor costs to be \$1,010,000 for year 1. The first three jobs that Southern Rim worked on had actual direct labor costs of \$60,000 for Job 301, \$85,000 for Job 302, and \$150,000 for Job 303. For the year, actual manufacturing overhead was \$424,000 and total direct labor cost was \$839,000. Manufacturing overhead is applied to jobs on the basis of direct labor costs using predetermined rates.Required:a. How much overhead was assigned to each of the three jobs, 301, 302, and 303?b. What was the over - or underapplied manufacturing overhead for year 1?

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1. 1 December, 15:32
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Job 301 = 45% * \$60,000 = 27000

Job 302 = 45% * \$85,000 = 38,250

Job 303 = 45% * \$150,000 = 67,500

b) Under - applied overheads = \$291,250.00

Explanation:

OAR = (Estimated overheads for the period / Estimated labour cost) * 100

= \$\$454,500 / \$1,010,000 * 100

= 45% of labour cost

Job 301 = 45% * \$60,000 = 27,000

Job 302 = 45% * \$85,000 = 38,250

Job 303 = 45% * \$150,000 = 67,500

b) Determine the over or under absorbed overhead