TCO 2 Royal Company uses budgeted overhead rates to apply ov

(TCO 2) Royal Company uses budgeted overhead rates to apply overhead to individual jobs. It uses a system based on machine hours. Last year, the company made the following estimates for this year.

Direct labor costs $9,900,000
Factory overhead costs $11,748,000
Direct Labor Hours 550,000
Machine Hours 660,000

(a) What is the budgeted overhead rate for the company? (Show your work)

(b) If Job #31255 had the costs listed below, what would be the total cost of Job #31255? (Show your work)

Material costs were $300,000;
Direct labor costs were $216,000;
Direct labor hours were 12,000; and
Machine hours were 15,000.

Solution

a. budgeted overhead rate=Factory overhead costs/Machine Hours

=(11,748,000/ 660,000)=$17.80

b.

Total overhead=(17.8*15000)=$267000

Hence total cost of Job=(Material cost+Direct labor cost+Overheads)

=(300,000+216000+267000)=$783000.