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Job 2 uses 65 direct labour hours in Cutting at $155 per hour and 25 direct labour hours in Assembly at $236 per hour. What overhead is applied to Job 2?
A$16,380
B$15,975
C$10,075
D$17,100
Answer & Solution
Correct answer: B. $15,975
1. Cutting: 65 direct labour hours times $155 per hour gives $10,075.
2. Assembly: 25 direct labour hours times $236 per hour gives $5,900.
3. The job total is $10,075 plus $5,900, which is $15,975.
4. $16,380 is the Job 2 figure produced by the single factory wide rate of $182 per hour.
5. $17,100 is the Job 2 figure produced by activity based costing.
_Source: Jonick, Principles of Managerial Accounting (UNG Press, CC BY-SA 4.0), section 4.3 Departmental Rates to Estimate Factory Overhead_
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