Dairy farm determined that the total predetermined OH rate for costing purposes
ID: 2385459 • Letter: D
Question
Dairy farm determined that the total predetermined OH rate for costing purposes is $26.80 per cow per day (referred to as animal days). Of this, $25.20 is the variable portion. OH cost info for two levels of activity are as follows:
4000 animal days 6,000 animal days
Indirect Materials $25,600 $38,400
Indirect Labor 56,000 80,000
Maintenance 10,400 13,600
Utilities 8,000 12,000
All other 15,200 21,600
a. Determine fixed and variable values for each of the overhead items, and determine the total cost formula.
You can just work the 4,000 animal days so I can understand how to work the other one myself! Thank you!
Explanation / Answer
Variable Fixed
Indirect Materials
($38,400 - $25,600)/(6,000 – 4,000) = $6.40
Variable 4,000 x $6.40 $25,600 ($25,000 - $25,600) 0
Indirect Labor
($80,000 - $56,000)/(6,000 – 4,000) = $12
Variable 4,000 x $12 $48,000 ($56,000 - $48,000) 8,000
Maintenance
($13,600 - $10,400)/(6,000 – 4,000) = $1.60
Variable 4,000 x $1.60 $6,400 ($10,400 - $6,400) 4,000
Utilities
($12,000 - $8,000)/(6,000 – 4,000) = $2
Variable 4,000 x $2 $8,000 ($8,000 - $8,000) 0
All Other
($21,600 - $15,200)/(6,000 – 4,000) = $3.20
Variable 4,000 x $3.20 $12,800 ($15,200 - $12,800) 2,400
Total $100,800 $14,400
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