Question

Walton Corporation estimated its overhead costs would be $23,200 per month except for January when it pays the $120,120 annual insurance premium on the manufacturing facility. Accordingly, the January overhead costs were expected to be $143,320 ($120,120 + $23,200). The company expected to use 7,500 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 3,750 units of product in each month except July, August, and September, in which it produced 4,950 units each month. Direct labor costs were $24.90 per unit, and direct materials costs were $10.00 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 $20.30 per unit.

Answer 1

Solution Lavage Rapide " to+سلم I. overhead rate based on dorect labor hours = 398520/97200 = 4! Total no of Labor hours = ( 7500 89) + (9900x 3) = 97200 Total Overhead (23200 X 12) + 120120 = 398520 2. Total allocated overhead Cost Month January March August Labor hours 7500 7500 9900 4.1 Overhead rate based on direct Labor hours 30750 30750 40590 Total allocated overhead Cost = labor hours x overhead cost per Labor coste unit Cost per Month January March August Raw Material per unit 10.00 10.00 10.00 24.90 24.90 24.90 8.2 8.2 Direct Labor overhead Cost per unit Total overheads / no. of units produced Cost per unit 8.2 143.1 43.)

- 4 11 Gelling price Gelling p per unit = cost per unit t gross margin = 4301 + 20-30 = 63.4