Alpha Technology's Work in Process Inventory on June 1 Has

question 197

Essay

Alpha Technology's work in process inventory on June 1 has a balance of $27,200 representing Job No. 72. During June, $68,900 of direct materials were requisitioned for Job No. 72 and $5,500 of direct labor cost was incurred on Job No. 72. Manufacturing overhead is allocated at a rate of $16.00 per direct labor hour. Actual manufacturing overhead costs incurred in June amounted to $15,000. There were 700 actual direct labor hours worked in June. No new jobs were started during June. Job No. 72 is completed on June 28.
a. Determine the total cost assigned to Job No. 72.
b. Is manufacturing overhead overallocated or underallocated for the month of June? By how much?

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Definitions:

Actual Output

The real quantity of goods or services produced within a specified period.

Variable Overhead Rate

A rate used to assign variable overhead costs to units of production, based on an activity driver such as labor hours or machine hours, fluctuating with changes in production activity.

Overhead Efficiency

The effectiveness with which a business uses its overhead expenses to produce goods or services.

Fixed Overhead Budget

A forecast of the fixed costs that a company expects to incur over a certain period, helping in planning and controlling expenses.