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The Turquoise Company uses predetermined overhead rates to apply manufacturing overhead to jobs. The predetermined overhead rate is based on labor cost in Dept. A and machine-hours in Dept. B. At the beginning of the year, the company made the following estimates:
Dept A Dept B Direct labor cost $ 65,000 $ 42,000 Manufacturing Overhead $ 91,000 $ 48,000 Direct labor hours 8,000 10,000 Machine hours 3,000 12,000
They recently received an order for a job from a company in Vermont. The expected cost of this job is:
Dept A Dept B Direct labor cost $ 7,000 $ 3,500 Direct labor hours 500 600 Machine hours 100 435
What is the estimated overhead cost for this job?
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Explain your answer with legal arguments.
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