If a new bakery has the following monthly expenses Rent 500 Utilities 300 And la
ID: 2525815 • Letter: I
Question
If a new bakery has the following monthly expenses Rent 500 Utilities 300 And labor at 10.50 per hour Supplies 1200/ month And 800 hours a month to produce and package all goodsA) Estimate your annual overhead and direct labor hours to obtain your predetermined rate. Explain your calculation.
B) Using the Predetermined rate, assign your overhead for the period and then determined Break even production. If a new bakery has the following monthly expenses Rent 500 Utilities 300 And labor at 10.50 per hour Supplies 1200/ month And 800 hours a month to produce and package all goods
A) Estimate your annual overhead and direct labor hours to obtain your predetermined rate. Explain your calculation.
B) Using the Predetermined rate, assign your overhead for the period and then determined Break even production. Rent 500 Utilities 300 And labor at 10.50 per hour Supplies 1200/ month And 800 hours a month to produce and package all goods
A) Estimate your annual overhead and direct labor hours to obtain your predetermined rate. Explain your calculation.
B) Using the Predetermined rate, assign your overhead for the period and then determined Break even production.
Explanation / Answer
a) Overhead per month:
Rent +Utilities = 800 per month
Annual overhead = 800 x 12 = 9,600
Direct labour hours per month = 800
Direct labour hours per year = 800 x 12 = 9,600
Predetermined rate = Total overhead per year/Direct labour hours per year = 9,600/9,600 = $1 per hour
b) Overhead for the period = Predetermined overhead rate x Number of direct labour hours for that period = 1 x 800 = 800
Break even productioncan be determined using sales price per unit. The formula is = Total fixed Costs/Contribution per unit where contribution per unit is nothing but selling price per unit -variable cost per unit
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