The $4.50 ($3.00 + $1.50) total overhead rate per direct labor hour is based on
ID: 2455908 • Letter: T
Question
The $4.50 ($3.00 + $1.50) total overhead rate per direct labor hour is based on an expected operating level equal to 70% of the factory's capacity of 65,000 units per month. The following monthly flexible budget information is also available.
During the current month, the company operated at 65% of capacity, employees worked 400,000 hours, and the following actual overhead costs were incurred. (Do not round intermediate calculations. Round "OH costs per hour" to 2 decimal places.)
1. Complete the predetermined overhead application rate per hour for variable overhead, fixed overhead and total overhead at 70% of capacity.
Sedona Company set the following standard costs for one unit of its product for 2015.Explanation / Answer
Sedona Company Data 65% 70% 75% Budgeted output (units) 42,250 45,500 48,750 Budgeted labor (standard hours) @10hr per unit 4,22,500 4,55,000 4,87,500 Budgeted overhead (dollars) Variable overhead @ $ 3 /hour $ 12,67,500 $ 13,65,000 $ 14,62,500 Fixed overhead (455,000 x $ 1.5) 6,82,500 6,82,500 6,82,500 Total Overhead $ 19,50,000 $ 20,47,500 $ 21,45,000 Actual data @ 65% Capacity Actual hours 4,00,000 Output units at 60% Capacity 42,250 Actual hours per unit 9.47 Actual overhead rate per unit: Variable overhead ($ 1,224,000/ 42,250 ) 28.97 Fixed overhead ($ 730,000/ 42,250 ) 17.28 Variable overhead rate per hour ($ 28.97/9.47) 3.06 Computation of predetermined overhead rate per hour at 70% capacity Variable overhead Fixed Overhead Total Overhead Output units at 70% Capacity 45,500 45,500 45,500 Variable overhead rate per hour 3.06 Fixed Overhead rate per hour ((730,000/45500) /9.47) 1.69 Total Overhead rate (3.06 + 1.69) 4.75 Total overhead ($ 3.06 x 9.47 x 42,250 units) + $ 730000 $ 20,48,508.10
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