2. Job Order Costing

Oak-ay Furniture Company uses a job order costing system to track the cost of each piece of furniture it builds. To fully understand its costs, the company wants to use an activity base that reflects the work required for each job.

Which of the following would be the most appropriate activity base?

Prisca’s Print Shop plans to calculate a predetermined overhead rate using machine hours as the activity base.

Managers estimate the following manufacturing overhead costs for the month:

The printing facility lease will cost \$48,000, utilities for the presses are expected to be \$12,000, maintenance for the printing equipment will cost \$9,000, and the factory supervisor’s salary will be \$21,000. The company expects its printing machines to operate 4,500 machine hours during the month.

What is the predetermined overhead rate per machine hour?

Prisca’s Print Shop applies manufacturing overhead using a predetermined overhead rate of \$20 per machine hour.

The company is currently calculating the unit cost for Job #204, which involves printing 500 custom event posters for a local business. Job #204 will require 120 machine hours. It will also incur the cost of specialty paper of \$1,200, as well as ink and printing plates of \$300. Direct labor on this job is estimated to cost \$2,000.

Using the company’s predetermined overhead rate, what is the unit cost to produce one poster in Job #204?