Problem - Isabelle Manufacturing is a small manufacturer that uses machine-hours as its activity base for assigned overhead costs to jobs. The company estimated the following amounts for 2011 for the company and for Job 62:
Company Job 62
Direct materials $60,000 $4,500
Direct labor $25,000 $2,500
Manufacturing overhead costs $72,000
Machine hours 90,000 1,350
During 2011, the actual machine-hours totaled 94,000, and actual overhead costs were $71,000.
(a) Compute the predetermined overhead rate.
(b) Compute the total manufacturing costs for Job 62.
(c) How much overhead is over or underapplied for the year for the company? State the amount and whether it is over- or underapplied.
(d) If Isabelle Manufacturing sells Job 62 for $14,000, compute the gross profit.