- This topic has 2 replies, 2 voices, and was last updated 10 years, 2 months ago by
.
-
Topic
-
Mason Company uses a job-order cost system and applies manufactruing overhead to jobs using a predetermined overhead rate based on direct-labor dollars. The rate for the current year is 200% of direct-labor dollars. This rate was calculated last December and will be used throughout the current year. Mason had one job, No. 150, in process on August 1 with raw materials costs of $2000 and direct-labor costs of $000. During August, raw materials and direct labor added to jobs were as follows:
No. 150, No. 151, No. 152
Raw Materials: x 4000 1000
Direct labor 1500 5000 2500
Actual manufacturing overhead for the month of August was 20,000. During the month, Mason completed jobs no. 150 and 151. For August, manufacruing overhead was
A: underapplied by 7000
B: underapplied by 2000
C: overappied by 4000
D; underapplied by 1000
Answer: B, underapplied by 2000. This answer is correct because predetermined overhead rate is based on 200% of direct-labor dollars. The sum of the direct-labor dollars for the month of August was $9,000. To find manufacturing overhead applied for August, the $9,000 direct-labor dollars is multiplied by 200%, which is $18,000. Therefore, subtracting applied manufacturing overhead from $20,000, actual manufacturing overhead accounts for $2,000 of underapplied manufacturing overhead in the month of August.
Why no include $3000 direct labor costs on August 1? (direct labor amount in answer only includes 1500 + 5000 + 2500 = 9000) Isn’t August 1 technically a part of August?
- You must be logged in to reply to this topic.
