Levron Corporation uses a job-order costing system with a single plantwide predetermined overhead rate based on machine-hours. The company based its predetermined overhead rate for the current year on total fixed manufacturing overhead cost of $58,000, variable manufacturing overhead of $2.00 per machine-hour, and 20,000 machine-hours. The company has provided the following data concerning Job P978 which was recently completed: The amount of overhead applied to Job P978 is closest to: (Round your intermediate calculations to 2 decimal places.)

A) $232
B) $160
C) $392
D) $552

Question

Levron Corporation uses a job-order costing system with a single plantwide predetermined overhead rate based on machine-hours. The company based its predetermined overhead rate for the current year on total fixed manufacturing overhead cost of $58,000, variable manufacturing overhead of $2.00 per machine-hour, and 20,000 machine-hours. The company has provided the following data concerning Job P978 which was recently completed:

The amount of overhead applied to Job P978 is closest to: (Round your intermediate calculations to 2 decimal places.)

A) $232
B) $160
C) $392
D) $552

Katie Riley · Accepted Answer

Final Answer : C, Explanation :  Predetermined overhead rate = (Fixed manufacturing overhead cost + Variable manufacturing overhead cost)/Machine-hoursPredetermined overhead rate = ($58,000 + $2.00 per machine-hour x 20,000 machine-hours) / 20,000 machine-hours = $2.90 per machine-hourOverhead applied to Job P978 = Predetermined overhead rate x Machine-hours used on Job P978Overhead applied to Job P978 = $2.90 per machine-hour x 135 machine-hours = $391.50The amount of overhead applied to Job P978 is closest to $392.

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