- Custom Woodworks applies overhead at $18 per machine hour. Job #389 required 65 machine hours, $4,800 in direct materials, and $2,200 in direct labor. The job also required 12 hours of setup time (included in the 65 machine hours) that used specialized equipment costing an additional $240. How should the $240 be treated in determining the job cost?
Answer: Included in the predetermined overhead rate, making total job cost $8,170
The $240 specialized equipment cost should already be included in the predetermined overhead rate of $18 per machine hour, as overhead rates are designed to capture all indirect costs. Basic job cost = $4,800 (DM) + $2,200 (DL) + (65 × $18) (OH) = $4,800 + $2,200 + $1,170 = $8,170. Choice A incorrectly adds the $240 as direct materials. Choice B incorrectly adds it to overhead. Choice D incorrectly treats it as period cost.
- Elite Manufacturing completed Job #678 with the following costs: direct materials $15,200, direct labor $8,400, applied overhead $12,600. Upon inspection, 15% of the units were found defective and required additional materials costing $950 and 18 labor hours at $35 per hour to rework. If overhead is applied at 150% of direct labor cost, what is the total cost of Job #678 after rework?
Answer: $38,725
Original job cost = $15,200 + $8,400 + $12,600 = $36,200. Rework costs: additional materials $950, additional labor 18 × $35 = $630, additional overhead 150% × $630 = $945. Total rework cost = $950 + $630 + $945 = $2,525. Total job cost = $36,200 + $2,525 = $38,725. Choice A omits overhead on rework labor. Choice C and D add incorrect amounts.
- Alpine Construction applies overhead based on machine hours. The predetermined overhead rate is $45 per machine hour. Job #892 used 180 machine hours and incurred $15,600 in direct labor costs and $28,400 in direct materials. If actual overhead for the period was $8,500 and actual machine hours were 185, what amount of overhead was applied to Job #892?
Answer: $8,100
Applied overhead = Predetermined overhead rate × Actual machine hours used by the job = $45 × 180 hours = $8,100. The actual overhead incurred and total actual machine hours for the period are irrelevant for calculating overhead applied to this specific job. Choice B uses 185 hours instead of 180. Choice C uses the actual overhead amount. Choice D appears to use an incorrect rate calculation.
- Pacific Aerospace's Job #823 shows direct labor of $18,600 and applied overhead of $23,250. The predetermined overhead rate is 125% of direct labor cost. During final inspection, it was discovered that $1,200 of labor costs were incorrectly charged to this job and should be transferred to Job #824. What is the correct applied overhead for Job #823 after the adjustment?
Answer: $21,750
Original direct labor = $18,600. After correction = $18,600 - $1,200 = $17,400. Correct applied overhead = 125% × $17,400 = $21,750. Choice B uses an incorrect rate calculation. Choice C keeps the original overhead amount without adjustment. Choice D appears to add rather than subtract the correction.
