Question

13. Hogan’s Ltd uses a job order cost system and allocates manufacturing overhead to orders on the basis of direct labour cost. The predetermined overhead rates for the year are 200% for Department A and 50% for Department B. Job# 23, started and completed during the year, had the following costs (note: some of the data below is incomplete)

: Department A B

Direct materials $25,000 $5,000

Direct labour ? 30,000

Manufacturing Overhead 40,000 ?

Answer 1

• All working forms part of the answer
• Working for Department A

Department A
Manufacturing Overhead	$                        40,000.00
Predetermined Overhead rate	200% of Direct Labor Cost
Direct Labor Cost	$                        20,000.00   [$40,000 / 200%]

• Working for Department B

Department B
Direct Labor Cost	$                        30,000.00
Predetermined Overhead rate	50% of direct labor cost
Manufacturing overhead	$                        15,000.00 [$30,000 x 50%]

• Answer, including missing figures:

	Department A	Department B
Direct material	$                        25,000.00	$                     5,000.00
Direct Labor	$                        20,000.00	$                   30,000.00
Manufacturing Overhead	$                        40,000.00	$                   15,000.00
Total	$                        85,000.00	$                   50,000.00