[blouseman]

How do I put an overhead figure on a job estimate that there is no cost of goods.
My overhead is 30,000 a month.
I am using all my people that are part of the overhead

[hamzashakaa]

Yoy should allocate the overhead costs based on a relevant activity level. Lets assume that labor hours is your activity measure or the allocation base. Then you should divide the total overhead costs by the total direct labor hour for all the jobs this will gives you the allocation rate. After that assume that a specific job required 20 hours of labor, then you should multiply the allocation rate by 20 hours to get the overhead cost that should be allocated to the job.

[blouseman]

Can you please put the answer in numbers?

[hamzashakaa]

OK. Lets assume that there are only two jobs (Job A and Job B) Job A required $5000 of direct materials and $12000 in direct labor and direct labor hours were 100 hours.Job B required 3000 of direct materials and $7000 of direct labor.and direct labor hours were 80 hours. The total manufacturing overhead expenses for the two jobs are $30000.
The cost of Job A is as follows:
Direct materials 5000
Direct labor 12000
Manafacturing overhead allocated = ($30000/ (100hours+80))= 166.7
166.7*100= $16667

The total cost of job A is (5000+12000+16667)= 33667

[blouseman]

I'm close to understanding,but why are you putting the 80 hours and not the material and labor in your calculation.5000+12000+16667
3000+7000=?

[hamzashakaa]

Thw direct materials and direct labor are assigned directly to the job. But the cost of overhead cannot be assigned directly to each job so we allocated them using a relevant allocation base which is in our case direct labor hours. For example the elictricity cost in the factory cannot be assigned directly to each job.