Olney Recycling recycles newsprint, cardboard, and so forth, into recycled packaging materials. For the coming year, Olney estimates total manufacturing overhead to be $370,000. The company's managers are not sure if direct labor hours (estimated to be 10,000) or machine hours (estimated to be 14,800 hours) is the best allocation base to use for allocating manufacturing overhead. Olney bids for jobs using a 31% markup over total manufacturing cost. Requirement 1. Compute the total job cost and bid price if Olney Recycling decided to use direct labor hours as the manufacturing overhead allocation base for the year. First calculate the predetermined overhead rate based on direct labor hours. Identify the formula and then compute the rate. Estimated yearly overhead costs + Estimated yearly direct labor hours = Predetermined overhead rate 10,000 37 per hour $ 370,000 Next we will calculate the total job cost. Direct materials Direct labor Manufacturing overhead Total job cost Job Sheet After the new fiscal year began, Leftwich Paper Supply asked Olney Recycling to bid for a job that will take 2,020 machine hours and 1,650 direct labor hours to produce. The direct labor cost for this job will be $11 per hour, and the direct materials will total $25,400. Read the requirements. 25,400 18,150
Olney Recycling recycles newsprint, cardboard, and so forth, into recycled packaging materials. For the coming year, Olney estimates total manufacturing overhead to be $370,000. The company's managers are not sure if direct labor hours (estimated to be 10,000) or machine hours (estimated to be 14,800 hours) is the best allocation base to use for allocating manufacturing overhead. Olney bids for jobs using a 31% markup over total manufacturing cost. Requirement 1. Compute the total job cost and bid price if Olney Recycling decided to use direct labor hours as the manufacturing overhead allocation base for the year. First calculate the predetermined overhead rate based on direct labor hours. Identify the formula and then compute the rate. Estimated yearly overhead costs + Estimated yearly direct labor hours = Predetermined overhead rate 10,000 37 per hour $ 370,000 Next we will calculate the total job cost. Direct materials Direct labor Manufacturing overhead Total job cost Job Sheet After the new fiscal year began, Leftwich Paper Supply asked Olney Recycling to bid for a job that will take 2,020 machine hours and 1,650 direct labor hours to produce. The direct labor cost for this job will be $11 per hour, and the direct materials will total $25,400. Read the requirements. 25,400 18,150
Chapter1: Making Economics Decisions
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Transcribed Image Text:Olney Recycling recycles newsprint, cardboard, and so forth, into recycled packaging materials. For the
coming year, Olney estimates total manufacturing overhead to be $370,000. The company's managers are not
sure if direct labor hours (estimated to be 10,000) or machine hours (estimated to be 14,800 hours) is the best
allocation base to use for allocating manufacturing overhead. Olney bids for jobs using a 31% markup over
total manufacturing cost.
Requirement 1. Compute the total job cost and bid price if Olney Recycling decided to use direct labor hours as the manufacturing overhead allocation base for the year.
First calculate the predetermined overhead rate based on direct labor hours. Identify the formula and then compute the rate.
Estimated yearly overhead costs
Estimated yearly direct labor hours =
Predetermined overhead rate
370,000
10,000
$
37
per hour
$
Next we will calculate the total job cost.
Direct materials
Direct labor
Manufacturing overhead
Total job cost
Job Sheet
After the new fiscal year began, Leftwich Paper Supply asked Olney Recycling to bid for a job that will
take 2,020 machine hours and 1,650 direct labor hours to produce. The direct labor cost for this job
will be $11 per hour, and the direct materials will total $25,400.
Read the requirements.
25,400
18,150
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