(Cost driver and pre-determined overhead) Memories, Inc. (MI) produces souvenir
ID: 2556491 • Letter: #
Question
(Cost driver and pre-determined overhead) Memories, Inc. (MI) produces souvenir figurines that are sold wholesale to gift shops. They have created a new line of dolls representing historical figures. The company's goal is to produce and sell 350,000 dolls each year. MI plans to keep approximately a one-month supply of dolls in finished goods inventory MI will have 10 production lines. Each of the five workers on each line will be responsible for one of the five stages of production: molding, cleaning, painting. finishing, and packaging. Each of the 10 production lines can produce 20 dolls per hour MI deals exclusively with Quality Materials, Inc. to purchase raw materials and equipment. All materials (plastic, molds, paint, etc.) are delivered within two days of ordering and MI generally holds only a one- or two- day supply in raw materials inventory The projected materials costs are: Material cost per doll Plastic Doll molds Varnish Paint Packaging $.12 20 08 30 04Explanation / Answer
C. the predetermined overhead rate per unit = estimated Annual overhead cost / estimated doll production = 191700/350000 = $0.55 per unit
Actual overhead rate per unit = actual overhead cost / actual doll production = 193000 / 336033 = $0.57 per unit
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