Question 2: Job-Order Costing:

Calculating unit product costs Custom Corporation uses a job-order costing system with a single plantwide predetermined overhead rate based on machine-hours. The company based its predetermined overhead rate for the current year on the following data:

Total machine-hours 20,000

Total fixed manufacturing overhead cost $80,000

Variable manufacturing overhead per machine-hour $3.00

Recently Job G215 was completed with the following characteristics:

Number of units in the job 40

Total machine-hours 70

Direct materials $910

Direct labor cost $3,600

Required:

a. Estimate the total manufacturing overhead cost. (4 marks)

b. Calculate the predetermined overhead rate for the year. (3 marks)

c. Calculate the amount of overhead applied to Job G215. (3 marks)

d. Calculate the total job cost for Job G215. (4 marks)

e. Calculate the unit product cost for Job G215. (3 marks)

f. Why do most companies use predetermined overhead rates rather than actual overhead rates? (3 marks)