JOB-ORDER COSTING
Alba Foundry in Boston uses a predetermined manufacturing overhead rate to allocate overhead to individual jobs based on the machine hours required. At the beginning of the year, the company expected to incur the following
Manufacturing overhead costs . . . . . . . . $620,000
Direct labor cost . . . . . . . . . . . . . . . . . . . . $1,450,000
Machine hours . . . . . . . . . . . . . . . . . . . . . 77,500
At the end of the year, the company had actually incurred the following:
Direct labor cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,250,000
Depreciation on manufacturing plant and equipment . . . . . . . . . . . . . . . . . . . . . . . . $475,000
Property taxes on plant . . . . . . . . . . . . . . . . . . . . . . $21,000
Sales salaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $23,000
Delivery drivers' wages . . . . . . . . . . . . . . . . . . . . . . $14,500
Plant janitors' wages . . . . . . . . . . . . . . . . . . . . . . . . $9,500
Machine hours . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55,000 hours
Requirements -
1. Compute the predetermined manufacturing overhead rate.
2. How much manufacturing overhead was allocated to jobs during the year?
3. How much manufacturing overhead was incurred during the year? Is manufacturing overhead underallocated or overallocated at the end of the year? By how much?
4. Were the jobs overcosted or undercosted? By how much?