Kevin\'s Company uses a normal costing system, applying overhead using a single

Question

Kevin's Company uses a normal costing system, applying overhead using a single plant-wide rate. At the beginning of the year, budgeted (estimated) manufacturing overhead costs totaled $400,000, budgeted direct labor hours totaled 80,000 hours and budgeted machine hours totaled 20,000 hours. At the end of the year, the actual overhead costs recorded totaled $450,000 and actual direct labor hours were 86,000. Kevin's Company's production process is very labor-intensive and therefore uses direct labor hours as the activity base. With this information, what is the assigned (applied) amount of MOH that Sherfield Company assign to production?

Explanation / Answer

The plant wide overhead rate is a single overhead rate. In this, a company allocate all of its manufacturing overhead costs to products or cost objects. It is most commonly used in smaller entities with simple cost structures.

It is acceptable in following circumstances-:

Single plan wicde rate per hour = $ 400,000 / 80,000 hours

                                             = $ 5 per hour

MOH = 86000 hours @ $ 5per hour

          = $ 430,000

Related Questions

Navigate

• Browse (All)
• Browse K
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.