Miskimen Industries uses job costing to calculate the costs of its jobs with direct labor cost as its manufacturing overhead allocation base. The company manufactures a variety of engines for use in farm equipment. At the beginning of the current year, Miskimen estimated that its overhead for the coming year will be $364,000. It also anticipated using 28,000 direct labor hours for the year. Miskimen pays its employees an average of $26 per direct labor hour. Miskimen just finished Job 371, which consisted of two engines for a farm equipment manufacturer. The costs and hours for this job consisted of $15,500 in direct materials used and 110 direct labor hours.

Requirements

1. What is Miskimen's predetermined manufacturing overhead rate based on direct labor cost?

2. Calculate the manufacturing overhead to be allocated based on direct labor costs to Job 371.

3. What is the total cost of Job 371?

Instructions are listed below.

Explanation:

Giving the following information:

Miskimen estimated that its overhead for the coming year will be $364,000. It also anticipated using 28,000 direct labor hours for the year.

1) To calculate the estimated manufacturing overhead rate we need to use the following formula:

Estimated manufacturing overhead rate = total estimated overhead costs for the period / total amount of allocation base

Estimated manufacturing overhead rate = 364,000/28,000 = $13 per direct labor hour

2) Job 371 = 110 direct labor hours

Allocated MOH = Estimated manufacturing overhead rate * Actual amount of allocation base

Allocated MOH = 13*110 = $1,430

3) Miskimen pays its employees an average of $26 per direct labor hour.

Job 371:

Direct material = $15,500

used and 110 direct labor hours

Total cost = direct material + direct labor + allocated overhead

TC = 15,500 + 110*$26 + 1,430 = $19,790