Farrer Manufacturing Company uses a job order costing system. All relevant information for Jobs #203 and #204, which were completed during May, is provided here. No other jobs were in process during the month of May.

A predetermined overhead rate of $12 per direct labor hour is used to apply manufacturing overhead costs to jobs. Actual manufacturing overhead for the month of May totaled $25,000. All completed products are delivered to customers immediately after completion, so costs are transferred directly to Cost of Goods Sold without going through Finished Goods Inventory.
1. How much manufacturing overhead will be assigned to each job completed during May?
2. Compute the total cost of each job.
3. Compute the unit cost for each job.
4. Compute the over- or under-applied manufacturing overhead for May.
5. Prepare the journal entries to transfer the cost of direct materials, direct labor, and manufacturing overhead to Work-in-Process Inventory and to transfer the cost of completed jobs to Cost of Goods Sold. (Because Farrer does not adjust the manufacturing overhead account until the end of the year, there is no need to adjust Cost of Goods sold for under/over-applied overhead for May.)
6. Interpretive Question: How would the company have computed its predetermined overhead rate of $12 per direct labor hour?Explain.

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Job #203 Job #204 Direct materials cost Direct labor cost Direct labor hours on job Units produced. $10,000 $7,800 $13,000 $10,800 1,400 800 1,000 1,750