Alba Foundry in Boston uses a predetermined manufacturing overhead rate to allocate overhead to individual jobs based on the machine hours required

JOB-ORDER COSTING

Alba Foundry in Boston uses a predetermined manufacturing overhead rate to allocate overhead to individual jobs based on the machine hours required. At the beginning of the​ year, the company expected to incur the​ following

Manufacturing overhead costs . . . . . . . .

$620,000

Direct labor cost . . . . . . . . . . . . . . . . . . . .

$1,450,000

Machine hours . . . . . . . . . . . . . . . . . . . . .

77,500

At the end of the​ year, the company had actually incurred the​ following:

Direct labor cost . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$1,250,000

Depreciation on manufacturing plant and

equipment . . . . . . . . . . . . . . . . . . . . . . . .

$475,000

Property taxes on plant . . . . . . . . . . . . . . . . . . . . . .

$21,000

Sales salaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$23,000

Delivery drivers’ wages . . . . . . . . . . . . . . . . . . . . . .

$14,500

Plant janitors’ wages . . . . . . . . . . . . . . . . . . . . . . . .

$9,500

Machine hours . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

55,000 hours

Requirements

1.

Compute the predetermined manufacturing overhead rate.

2.

How much manufacturing overhead was allocated to jobs during the​ year?

3

How much manufacturing overhead was incurred during the​ year?

Is manufacturing overhead underallocated or overallocated at the end of the​ year? By how​ much?

4.

Were the jobs overcosted or​ undercosted? By how​ much?

 

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