Question

Arabica Manufacturing Company uses a predetermined manufacturing overhead rate based on a percentage of direct labor cost. At the beginning of 2012, they estimated total manufacturing overhead costs at $1,050,000, and they estimated total direct labor costs at $840,000. In June, 2012, Arabica completed job number 511. Job stats are as follows:
Direct materials cost $27,500
Direct labor cost$13,000
Direct labor hours400 hours
Units of product produced: 200 crates


How much was the total job cost?

A) $40,500
B) $56,750
C) $50,900
D) $74,875

Answer 1

Answer:

B) $56,750

Explanation:

Direct materials cost $27,500

Direct labor cost$13,000

As manufacturing overhead rate is  based on a percentage of direct labor cost so dividing the manufacturing overheads by direct labor costs we get =$1,050,000,/$840,000= 1.25

Multiplying this rate with the actual overheads we get 1.25* 13000 = $16250

The total job cost would be = Direct materials cost+Direct labor cost + budgeted Overheads =  $27,500 +$13,000+$16250= $56,750