PLEASE ANSWER Byrd Company produces one product, a putter called GO-Putter. Byrd

Question

PLEASE ANSWER

Byrd Company produces one product, a putter called GO-Putter. Byrd uses a standard cost system and determines that it should take one hour of direct labor to produce one GO-Putter. The normal production capacity for this putter is 125,000 units per year. The total budgeted overhead at normal capacity is dollar 625,000 comprised of dollar 250,000 of variable costs and dollar 375,000 of fixed costs. Byrd applies overhead on the basis of direct labor hours. During the current year, Byrd produced 70,300 putters, worked 84,900 direct labor hours, and incurred variable overhead costs of dollar 95,257 and fixed overhead costs of dollar 306,523. Compute the predetermined variable overhead rate and the predetermined fixed overhead rate.

Explanation / Answer

Answer:

Standard DLH at normal capacity = No. of units at normal capacity * DLH per unit

= 125000 units * 1 hour

= 125000 hours

Predetermined variable OH rate = Budgeted variable OH cost/ Standard DLH at normal capacity

= $250000/ 125000 hrs. = $2/ DLH

Predetermined fixed OH rate = Budgeted fixed OH cost/ Standard DLH at normal capacity

=$375000/ 125000 hrs.

= $3/ DLH

Predetermined OH rate = Predetermined variable OH rate+Predetermined fixed OH rate

= $2 + $3 = $5/DLH

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