Question

Gerstein Corporation uses a job-order costing system with a single plantwide predetermined overhead rate based on direct labor-hours. The company based its predetermined overhead rate for the current year on total fixed manufacturing overhead cost of $90,000, variable manufacturing overhead of $3.70 per direct labor-hour, and 50,000 direct labor-hours. The company recently completed Job M800 which required 150 direct labor-hours.

The estimated total manufacturing overhead is closest to:

Multiple Choice

• $90,000

• $275,000

• $185,000

• $90,004

Answer 1

The estimated total manufacturing overhead can be calculated as follows-
Particulars	Amount
Estimated fixed manufacturing overhead cost	$90,000
Add: Estimated variable manufacturing overhead cost ($3.70 per direct labor-hour x 50,000 estimated direct labor-hours)	$185,000
Estimated total manufacturing overhead	$275,000
Hence, the second option is the correct answer.