Carradine Corporation uses a job-order costing system with a single plantwide predetermined overhead rate based on machine-hours.The company based its predetermined overhead rate for the current year on total fixed manufacturing overhead cost of $105,000, variable manufacturing overhead of $3.00 per machine-hour, and 70,000 machine-hours.The company recently completed Job P233 which required 60 machine-hours.The amount of overhead applied to Job P233 is closest to:

A) $90
B) $270
C) $450
D) $180

Question

Jose'Luis De La Torre · Accepted Answer

Final Answer : B, Explanation :  First, we need to calculate the predetermined overhead rate:Predetermined overhead rate = (total fixed manufacturing overhead cost + variable manufacturing overhead) / machine-hoursPredetermined overhead rate = ($105,000 + $3.00 per machine-hour x 70,000 machine-hours) / 70,000 machine-hoursPredetermined overhead rate = $108,000 / 70,000 machine-hours = $1.54 per machine-hourNext, we need to calculate the amount of overhead applied to Job P233:Overhead applied = predetermined overhead rate x actual machine-hours usedOverhead applied = $1.54 per machine-hour x 60 machine-hoursOverhead applied = $92.40Therefore, the closest answer choice is B) $270. Estimated total manufacturing overhead cost = Estimated total fixed manufacturing overhead cost + (Estimated variable overhead cost per unit of the allocation base × Estimated total amount of the allocation base)= $105,000 + ($3.00 per machine-hour × 70,000 machine-hours)= $105,000 + $210,000 = $315,000Predetermined overhead rate = Estimated total manufacturing overhead cost ÷ Estimated total amount of the allocation base = $315,000 ÷ 70,000 machine-hours = $4.50 per machine-hourOverhead applied to a particular job = Predetermined overhead rate x Amount of the allocation base incurred by the job = $4.50 per machine-hour × 60 machine-hours = $270

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