Elliott Company uses a predetermined overhead rate based on machine-hours to apply manufacturing overhead to jobs. The company manufactures tools to customer specifications. The following data pertain to Job 1501: What is the total manufacturing cost recorded on Job 1501?

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Elliott Company uses a predetermined overhead rate based on machine-hours to apply manufacturing overhead to jobs. The company manufactures tools to customer specifications. The following data pertain to Job 1501:

Direct materials used

$4,200

Direct labor-hours worked

300

Direct labor rate per hour

$8.00

Machine-hours used

200

Predetermined overhead rate per machine-hour

$15.00

What is the total manufacturing cost recorded on Job 1501?

a.  

$8,800

b.  

$9,600

c.  

$10,300

d.  

$11,100

The total manufacturing cost recorded on Job 1501 is $9,600 so option b is correct.

Explanation:

Manufacturing cost:

Manufacturing cost is the complete expenditure incurred when manufacturing an end product. The calculation for total manufacturing costs includes the expenses for direct labor, raw materials and manufacturing overhead.

Formula:

Total manufacturing cost = direct materials used + direct labor + total overhead

We need to calculate the total overhead first.

Formula for total overhead:

Total overhead = predetermined overhead rate * machine hours

As predetermined overhead rate per machine-hour = $15.00

and Machine-hours used = 200

therefore by putting the values in the above formula, we get

Total overhead = 15 * 200

Total overhead = $3000

Formula for direct labor:

Direct labor = direct labor-hours worked * direct labor rate per hour

As Direct labor-hours worked = 300 and Direct labor rate per hour = $8.00 so

Direct labor =  = 300 * 8

Direct labor = = $2400

Formula for Total manufacturing cost:

Total manufacturing cost = direct materials used + direct labor + total overhead

Therefore by putting the values in the above formula, we get

Total manufacturing cost = 4200 + 2400 + 3000

Total manufacturing cost = $9600

The total manufacturing cost recorded on Job 1501 is $9,600 so option b is correct.

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