Parker Corporation uses a job-order costing system and applies manufacturing overhead to jobs using a predetermined overhead rate based on direct labor-hours. Last year manufacturing overhead and direct labor-hours were estimated at $113,820 and 27,100 hours, respectively, for the year. In June, Job #461 was completed. Materials costs on the job totaled $5,700 and labor costs totaled $3,149 at $6.70 per hour. At the end of the year, it was determined that the company worked 31,600 direct labor-hours for the year and incurred $122,670 in actual manufacturing overhead costs. Required: a. Job #461 contained 100 units. Determine the unit product cost that would appear on the job cost sheet. b. Determine the underapplied or overapplied overhead for the year.

a. Unit cost per product = $10,675/100 = $106.75

b. Under applied overhead for the as computed above for the year = $9,960

Explanation:

Using the details provided

Job order cost manufacturing overhead rate predetermined = $113,820/27,100 = $4.2

Actual manufacturing overhead based on predetermined rate = 31,600 X $4.2 = $132,720

Actual overheads incurred = $122,760

Under absorbed overheads = $132,720 - $122,760 = $9,960

When the overheads are under absorbed the under absorbed overheads are not added to cost, total cost is then based on actual overheads incurred.

And under absorbed overheads form part of income statement.

Now provided material and labor cost for Job #461

Material = $5,700

Labor = $3,149 @ $6.7 per hour

Total labor hours for this job = $3149/6.7 = 470 hours

Actual overhead rate = $122,760 / 31,600 = $3.88

Since it is under absorbed Actual expenses will be considered

Total cost of Job 3461 = Material + Labor + Overhead

= $5,700 + $3,149 + ($122,760/31,600) X 470 = $8,849 + $1,826

= $10,675

Unit cost per product = $10,675/100 = $106.75

b. Under applied overhead for the as computed above for the year = $9,960