Reynolds Manufacturers Inc. has estimated total factory overhead costs of $95,000 and expected
direct labor hours of 9,500 for the current fiscal year. If job number 117 incurs 2,300 direct labor
hours, Work in Process will be debited and Factory Overhead will be credited for
a. $21,850
b. $2,300
c. $95,000
d. $23,000 (95,000/9500) = 10 (10 * 2300) = 23,000

The correct answer is D

Explanation:

Computation of allocation of factory overhead cost for the Job NO 117:

Now, computing the rate of overhead allocation as:

Pre- determined rate of overhead allocation = Estimated aggregate overhead / estimated number of labor hours

where

Estimated aggregate overhead is $95,000

Estimated number of labor hours is 9,500 hours

Putting the values above:

= $95,000 / 9,500 hours

= $10 per hour.

Computing the overhead cost to be allocated to Job No 117 as:

Overhead cost to be allocated to Job No 117 = Number of direct labor hours  × pre- determined rate of overhead

where

Number of direct labor hours is 2,300 hours

Pre- determined rate of overhead allocation  is 10 per hour

Putting the values above:

= 2,300 hours × $10 per hour

= $23,000

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