Everlast Manufacturing Company uses a predetermined manufacturing overhead rate based on a percentage of direct labor cost. At the beginning of 2020, they estimated total manufacturing overhead costs at $1,203,750, and they estimated total direct labor costs at $1,500,000.

Everlast Manufacturing Company uses a predetermined manufacturing overhead rate based on a percentage of direct labor cost. At the beginning of 2020, they estimated total manufacturing overhead costs at $1,203,750, and they estimated total direct labor costs at $1,500,000.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Question

a) Compute Everlast Manufacturing Company predetermined manufacturing overhead rate for 2020.

b) Determine how much manufacturing overhead was allocated to Job #B4000?

c) Calculate the total cost & quotation price of Job #B4000, given that a margin of 20% is applied.

Everlast Manufacturing Company uses a predetermined manufacturing overhead rate based on a
percentage of direct labor cost. At the beginning of 2020, they estimated total manufacturing overhead
costs at $1,203,750, and they estimated total direct labor costs at $1,500,00o.
The administration and selling overheads are to be absorbed in each job cost at 33%% of prime cost.
Distribution cost should be added to each job according to quotes from outside carriage companies.
The company wishes to quote for Job # B4000. Data for the job are as follows:
Direct materials cost
$159,500
Direct labour cost
$240,000
400 hours
$12,850
Direct labour hours
Special Design Cost
Distribution quote from haulage company
$17,900

Definition Definition Indirect costs incurred while producing goods or services. Overhead costs cannot be directly attributed to products or services. Overhead includes indirect material cost, indirect labor cost, rent, utilities expenses, and depreciation. Since these costs directly affect the profitability of a company, managing overhead becomes an important task for management.

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