Tuesday, May 29, 2012

Manufacturing Overhead Practice Problems

Assume that the accounting computations all require that the company use a job order cost system.

This corporation will apply manufacturing overhead to its jobs using a predetermined overhead rate based on direct labor-hours requires to complete a job. Last period, the company's manufacturing overhead  was $80,000. The direct labor hours were 16,000 hours.

Halfway through the year, job #10 was completed. Materials costs that the company spent on job #10 were $1,500. The labor costs that it spent totaled $2,400 at exactly $6 per hour.

At the end of the accounting year, the in-house accountants determined that the company worked 15,000 direct labor-hours for the year. During the same time, it incurred $78,000 in actual manufacturing overhead costs for the entire manufacturing year. 

Calculate the following using accounting manufacturing overhead formulas.

a. Determine amount of overhead that will be charged to jobs during the year.

b. Calculate predetermined overhead rate for the year.

c. Calculate amount of under- or overapplied overhead for the year.

d. Assume that 100 units were completed, what is the unit product cost (UPC) that would appear on the accounting job cost sheet for Job #10.

Answers to Manufacturing Overhead Accounting Problems


Predetermined overhead rate (POHR) = ( $80,000 / 16,000 ) = $5 per direct labor hour (DLH)


Hours worked at the company for year = 15,000 hour
Overhead applied with the Predetermined Overhead Rate (POHR) = ( 15,000 x $5 ) = $ 75,000


Actual Overhead was $ 78,000
Actual Overhead Underapplied by ( $78,000 - $75,000 ) = $ 3,000


Direct materials Cost = $ 1,500
Direct Labor Cost 2,400

Overhead applied  (400 Direct Labor Hour (DLH)* × $5/DLH) = 2,000

Total Cost= $5,900
Unit Product Cost = $59

$2,400/ $6 = 400/DLH

Additional Accounting Examples:

Calculate Manufacturing Overhead

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