Job-Order Costing and Decision Making [LO2-1, LO2-2, LO2-3] Taveras Corporation is currently operating at 50% of its available manufacturing capacity. It uses a job-order costing system with a plantwide predetermined overhead rate based on machine-hours. At the beginning of the year, the company made the following estimates:
Machine-hours required to support estimated production 225,000
Fixed manufacturing overhead cost $ 4,275,000
Variable manufacturing overhead cost per machine-hour $ 2.00
Required:
1. Compute the plantwide predetermined overhead rate.
2. During the year, Job P90 was started, completed, and sold to the customer for $3,700. The following information was available with respect to this job:
Direct materials 1,702
Direct labor cost $ 1,221
Machine-hours used 84
Compute the total manufacturing cost assigned to Job P90.

a. $21 per machine hours

b. $4,855          

Explanation:

a. The computation of the plantwide predetermined overhead rate is shown below:

Plantwide predetermined overhead rate is

= Variable overhead cost rate per machine hour + Fixed overhead cost rate per machine hour

= $2 + (fixed manufacturing overhead cost ÷ Estimated machine hours)

= $2 + ($4,275,000 ÷  225,000 machine hours)

= $2 + $19

= $21 per machine hour

b. Now the total manufacturing cost assigned is

Particulars                                      Amount

Direct material                               $1,702        

Direct labor                                $1,221

Variable manufacturing overhead $168

(84 × $2)

Total variable cost                        $3,091

Add:

Fixed manufacturing overhead

(84 × $21)                                $1,764

Total manufacturing cost assigned

to Job P90                                    $4,855          

a. money supply  

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