Your company estimates current overhead costs based on the prior year overhead cost. Allowances are made for significant increases in costs and volume if any. 2014 actual overhead costs included $1,500,000 of fixed costs and $600,000 of variable costs. 250,000 direct labor hours were incurred. Overhead is applied using direct labor hours charged to jobs. Volume produced and sold during 2014 was 1 million units.
Your Company estimates for 2015 that fixed overhead will be$1,600,000 and variable costs will be $660,000. Sales volume is projected to be 1.1 million units. All units produced are expected to be sold. Estimated direct labor hours are expected to total 275,000 hours.
Instructions:
Compute the overhead rate to be used for 2015.
Compute the cost assigned to Job 61 if the following costs were charged: direct material $10,000 and direct labor cost $16,000 @$10 per hour. Manufacturing overhead is applied using the rate computed in 1 above.
If the selling price is computed as total cost plus 60% what would be the selling price of Job 61?