Job Order Costing

Job Order Costing - PREDETERMINEDOVERHEADRATEFORMULA

Info iconThis preview shows pages 1–2. Sign up to view the full content.

View Full Document Right Arrow Icon
PREDETERMINED OVERHEAD RATE FORMULA The formula for computing a predetermined overhead rate is: Estimated total manufacturing overhead cost Predetermined  = overhead rate Estimated total amount of the allocation base The company in the preceding example applies overhead costs to jobs on the  basis of direct labor-hours. In other words, direct labor-hours is the allocation  base. At the beginning of the year the company estimated that it would incur  $320,000 in manufacturing overhead costs and would work 40,000 direct labor- hours. The company’s predetermined overhead rate is: $320,000  =  $8 per DLH 40,000 DLHs APPLICATION OF OVERHEAD TO JOBS The process of assigning overhead to jobs is known as  applying overhead . In the preceding example, Job 2B47 required 27 direct labor-hours. Therefore,  $216 of overhead cost was applied to the job as follows: Predetermined overhead rate. ................................. $8  per DLH Direct labor-hours required for Job 2B47. ............... ×     27       DLHs Overhead applied to Job 2B47. ............................... $216 JOB-ORDER COSTING EXAMPLE In the example appearing on the next few pages, we will trace how costs flow  through Reeder Company’s job-order costing system. 
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Image of page 2
This is the end of the preview. Sign up to access the rest of the document.

This note was uploaded on 02/18/2011 for the course ACCT 275 taught by Professor Stangota during the Spring '09 term at Rutgers.

Page1 / 4

Job Order Costing - PREDETERMINEDOVERHEADRATEFORMULA

This preview shows document pages 1 - 2. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online