Custom Metal Works produces castings and other metal parts to customer specifica

Question

Custom Metal Works produces castings and other metal parts to customer specifications. The company uses a job-order costing system and applies overhead costs to jobs on the basis of machine-hours. At the beginning of the year, the company used a cost formula to estimate that it would incur $4,230,000 in manufacturing overhead cost at an activity level of 564,000 machine-hours. The company had no work in process at the beginning of the year. The company spent the entire month of January working on one large order

Explanation / Answer

finished goods 30000

WIP 300000

300000/40000=7.5 per machine hour

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