Question

Campbell Corporation estimated Its overhead costs would be $23,200 per month except for January when it pays the $141,180 annual insurance premium on the manufacturing facility. Accordingly, the January overhead costs were expected to be $164,380 ($141,180+ $23,200). The company expected to use 7,800 direct labor hours per month except during July, August, and September when the company expected 9,900 hours of direct labor each month to build Inventories for high demand that normally occurs during the Christmas season. The company's actual direct labor hours were the same as the estimated hours. The company made 3.900 units of product in each month except July, August, and September, in which it produced 4,950 units each month. Direct labor costs were $23.60 per unit, and direct materials costs were $11.20 per unit. Required a. Calculate a predetermined overhead rate based on direct labor hours. b. Determine the total allocated overhead cost for January, March, and August c. Determine the cost per unit of product for January, March, and August. d. Determine the selling price for the product, assuming that the company desires to earn a gross margin of $20.80 per unit Complete this question by entering your answers in the tabs below. Reg A Regs B to D Determine the total allocated overhead cost, the cost per unit of product and the selling price for the product for January, March, and August. Assume that the company desires to earn a gross margin of $20.80 per unit. (Do not round Intermediate calculations. Round "Cost per unit" and "Price" to 2 decimal places.) January $ 32.760 March $ 32.760 August $ 41,580 Total allocated overhead cost Cost per unit Price

Answer 1

Answer-A-

Calculation of predetermined overhead rate based on direct labor hours

Predetermined Overhead rate = Estimated Overheads for the year / Estimated direct labor hours

Estimated overheads for the year = ($23200*11) + $164380 = $419,580

Estimated direct labor hours = (7800 hours * 9) + (9900 hours * 3) = 99900 direct labor hours

Predetermined Overhead rate = $419,580 / 99900 direct labor hours = $4.2 per direct labor hour

Answer B-

Direct Labor hours required per unit = Actual direct labor hours for the year / Total Units produced in a year

Direct Labor hours required per unit = 99900 direct labor hours / [(3900 units * 9) + (4950 units * 3)]   = 2 direct labor hours per unit

Calculation of total allocated overhead cost for January , March and August
	January	March	August
Units produced	3,900	3,900	4,950
x Direct Labor hours per unit	2	2	2
Total Direct Labor hours	7,800	7,800	9,900
x Overhead rate per direct labor hour	$4.2	$4.2	$4.2
Overhead allocated	$32,760	$32,760	$41,580

Answer-C-

Calculation of Cost per unit for January,March and August
	January	March	August
Direct Material	$11.20	$11.20	$11.20
Direct Labor	$23.60	$23.60	$23.60
Overheads	$8.40	$8.40	$8.40
Cost per Unit	$43.20	$43.20	$43.20

Answer-D-

Determination of selling price
	January	March	August
Cost per unit	$43.20	$43.20	$43.20
Add : Gross Margin per unit	$20.80	$20.80	$20.80
Price per unit	$64	$64	$64

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