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Garcia Manufacturing uses a job order cost system and applies overhead to production on
the basis of direct labor costs. On January 1, 2010, Job No. 50 was the only job in
process. The costs incurred prior to January 1 on this job were as follows: direct materials
$20,000, direct labor $12,000, and manufacturing overhead $16,000. As of January 1, Job
No. 49 had been completed at a cost of $90,000 and was part of finished goods inventory.
There was a $15,000 balance in the Raw Materials Inventory account.
During the month of January, Garcia Manufacturing began production on Jobs 51 and 52,
and completed Jobs 50 and 51. Jobs 49 and 50 were also sold on account during the
month for $122,000 and $158,000, respectively. The following additional events occurred
during the month.
Purchased additional raw materials of $90,000 on account.
Incurred factory labor costs of $65,000. Of this amount $16,000 related to employer
Incurred manufacturing overhead costs as follows: indirect materials $17,000; indirect
labor $15,000; depreciation expense $19,000, and various other manufacturing overhead
costs on account $20,000.
Assigned direct materials and direct labor to jobs as follows.
Job No. Direct Materials Direct Labor
50 $10,000 $ 5,000
51 39,000 25,000
52 30,000 20,000
Calculate the predetermined overhead rate for 2010, assuming Garcia Manufacturing
estimates total manufacturing overhead costs of $1,050,000, direct labor costs of
$700,000, and direct labor hours of 20,000 for the year.