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13 September, 17:35

Mesa Corp. allocates overhead to production on the basis of direct labor costs. Mesa's total estimated overhead is $450,000 and estimated direct labor is $180,000. Determine the amount of overhead applied to a job which used $20,000 of direct labor.

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  1. 13 September, 17:50
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    Allocated MOH = $50,000

    Explanation:

    Giving the following information:

    Mesa's total estimated overhead is $450,000 and estimated direct labor is $180,000. Determine the amount of overhead applied to a job which used $20,000 of direct labor

    First, we need to calculate the predetermined overhead rate:

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

    Predetermined manufacturing overhead rate = 450,000/180,000

    Predetermined manufacturing overhead rate = $2.5 per direct labor dollar

    Now, we can allocate overhead:

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

    Allocated MOH = 2.5*20,000

    Allocated MOH = $50,000
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