Custom Corporation uses a job-order costing system with a single plantwide predetermined overhead rate based on machine-hours. The company based its predetermined overhead rate for the current year on the following data:
Total machine-hours10,000
Total fixed manufacturing overhead cost $71,000
Variable manufacturing overhead per machine-hour $ 2.50
Recently Job P512 was completed with the following characteristics:
Number of units in the job 30
Total machine-hours 60
Direct materials $ 870
Direct labor cost $2,400
Required:
Problem a. Estimate the total manufacturing overhead cost.
Problem b. Calculate the predetermined overhead rate for the year.
Problem c. Calculate the amount of overhead applied to Job P512.
Problem d. Calculate the total job cost for Job P512
Problem e. Calculate the unit product cost for Job P512
Problem f. Why do most companies use predetermined overhead rates rather than actual overhead rates?