2. Southern Rim Parts estimates its manufacturing overhead to be $360,500 and its direct labor costs to...

2. Southern Rim Parts estimates its manufacturing overhead to be $360,500 and its direct labor costs to be $1,030,000 for year 1. The first three jobs that Southern Rim worked on had actual direct labor costs of $62,000 for Job 301, $87,000 for Job 302, and $160,000 for Job 303. For the year, actual manufacturing overhead was $414,000 and total direct labor cost was $837,000. 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 30?

b. What was the over- or underapplied manufacturing overhead for year 1?

Expert Solution

All working forms part of the answer
Workings

A	Estimated Budgeted Overhead	$ 360,500.00
B	Budgeted direct labor cost	1,030,000
C = A/B	Overhead rate	35% of direct labor cost

Requirement ‘a’

Working		Job 301	Job 302	Job 303
A	Direct labor cost	$ 62,000.00	$ 87,000.00	$ 160,000.00
B	Overhead rate	35%	35%	35%
C = A x B	Overhead assigned to each job [ANSWER]	$ 21,700.00	$ 30,450.00	$ 56,000.00

Requirement ‘b’

A	Actual Direct Labor cost	$ 837,000.00
B	Overhead rate	35%
C= A x B	Overhead applied	$ 292,950.00
D	Actual Manufacturing Overhead	$ 414,000.00
	Overheads are	Under - Applied
E = D - C	Overhead Under Applied by	$ 121,050.00

Answer: Overheads are UNDER-APPLIED by $ 121,050

ekkarill92 answered 2 years ago

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