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B3 Company is a manufacturing firm that uses job-order costing. The company applies overhead to jobs using a predetermined overhead rate based on machine-hours. At the beginning of the year, the company estimated that it would work 24,000 machine-hours and incur \$216,000 in manufacturing overhead cost. During the year, manufacturing overhead was applied to jobs. The actual level of activity for the year was 25,000 machine-hours and actual overhead costs were \$227,000.

Required:

a. Compute the predetermined overhead rate.

b. Job 124 utilized \$200 of Direct Materials and \$500 of Direct Labor while utilizing 100 machine hours to complete the job. What is the total job cost for Job 124?

c. Compute overhead applied for the year.

d. Was the overhead under- or overapplied? By how much? What can be done with the difference? What should be done in this case?

e. Give three examples of types of companies that would use Job Order Costing.

#### Solution Preview

a. Compute the predetermined overhead rate

Predetermined overhead rate = Estimated manufacturing overhead cost / estimated machine hours =\$216000/24000 =\$9 per machine hour.

b. Job 124 utilized \$200 of Direct Materials and \$500 of Direct Labor while utilizing 100 machine hours to complete the job. What is the total job cost for Job 124?

Overhead allocated to Job 124 =100 (machine hours) *\$9( Predetermined overhead rate)= \$900
Total ...

#### Solution Summary

Solution shows calculations of predetermined overhead rate and total job cost & overhead applied

\$2.19