Reference no: EM131829640
Problem - In December 2010, Gomez Company's manager estimated next year's total direct labor cost assuming 50 persons working an average of 2,000 hours each at an average wage rate of $15 per hour. The manager also estimated the following manufacturing overhead costs for year 2011.
Indirect labor $ 159,600
Factory supervision 120,000
Rent on factory building 70,000
Factory utilities 44,000
Factory insurance expired 34,000
Depreciation-Factory equipment 240,000
Repairs expense-Factory equipment 30,000
Factory supplies used 34,400
Miscellaneous production costs 18,000
Total estimated overhead costs $ 750,000
At the end of 2011, records show the company incurred $725,000 of actual overhead costs. It completed and sold five jobs with the following direct labor costs: Job 201, $354,000; Job 202, $330,000; Job 203, $175,000; Job 204, $420,000; and Job 205, $184,000. In addition, Job 206 is in process at the end of 2011 and had been charged $10,000 for direct labor. No jobs were in process at the end of 2010. The company's predetermined overhead rate is based on direct labor cost.
A) Determine the predetermined overhead rate for year 2011.
B) Total overhead cost applied to each of the six jobs during year 2011.
C) Over or underapplied overhead at year end 2011.