Asked by Jamie Sulley on Jul 27, 2024
Verified
Mesa Corp.allocates overhead to production on the basis of direct labor costs.Mesa's total estimated overhead is $450,000 and estimated direct labor is $180,000.Determine the amount of overhead applied to a job which used $20,000 of direct labor.
A) $8,000.
B) $20,000.
C) $70,000.
D) $50,000.
E) $90,000.
Overhead Applied
The allocation of estimated overhead costs to individual units of production based on a predetermined rate.
Direct Labor Costs
The total cost incurred by a company for the wages of employees who are directly involved in the operational production process.
- Acquire the knowledge to determine and assign overhead costs to jobs.
Verified Answer
RV
Romain Vianney Obame NdoutoumeAug 01, 2024
Final Answer :
D
Explanation :
To calculate the overhead applied to a job, we have to use the predetermined overhead rate, which is calculated as follows:
Predetermined overhead rate = Total estimated overhead / Estimated direct labor costs
Predetermined overhead rate = $450,000 / $180,000
Predetermined overhead rate = $2.50 per direct labor dollar
Therefore, the overhead applied to a job that used $20,000 of direct labor is:
Overhead applied = Predetermined overhead rate x Direct labor cost
Overhead applied = $2.50 x $20,000
Overhead applied = $50,000
Therefore, the correct answer is D)$50,000.
Predetermined overhead rate = Total estimated overhead / Estimated direct labor costs
Predetermined overhead rate = $450,000 / $180,000
Predetermined overhead rate = $2.50 per direct labor dollar
Therefore, the overhead applied to a job that used $20,000 of direct labor is:
Overhead applied = Predetermined overhead rate x Direct labor cost
Overhead applied = $2.50 x $20,000
Overhead applied = $50,000
Therefore, the correct answer is D)$50,000.
Learning Objectives
- Acquire the knowledge to determine and assign overhead costs to jobs.
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