Why is it necessary to use a predetermined overhead rate?
A) A timing issue exists between knowing the actual costs and needing to know the unit product cost for managerial decisions, such as product pricing decisions.
B) We, as accountants, want job security so we try to make things as complicated as possible.
C) Predetermined overhead rates are only used for Activity-Based Costing because cost drivers “drive” the manufacturing overhead.
D) all of the above.
Answer
‘A timing issue exists between knowing
the actual costs and needing to know the unit product cost for
managerial decisions, such as product pricing decisions.’
That is why Predetermined Overhead rate is used.
Why is it necessary to use a predetermined overhead rate? A) A timing issue exists between...
1. What is a predetermined overhead rate and explain why many companies use it? 2. Many accountants believe that overhead costs are the main source of product cost distortions. Do you agree or disagree? 3. Explain activity-based product costing.
Exercise 2-1 Compute a Predetermined Overhead Rate [LO2-1] Harris Fabrics computes its plantwide predetermined overhead rate annually on the basis of direct labor-hours. At the beginning of the year, it estimated that 20,000 direct labor-hours would be required for the period's estimated level of production. The company also estimated $94,000 of fixed manufacturing overhead cost for the coming period and variable manufacturing overhead of $2.00 per direct labor-hour. Harris's actual manufacturing overhead cost for the year was $123.900 and its...
Lupo Corporation uses a job-order costing system with a single plantwide predetermined overhead rate based on machine-hours. The company based its predetermined overhead rate for the current year on the following data: Total machine-hours 30,000 Total fixed manufacturing overhead cost $ 252,000 Variable manufacturing overhead per machine-hour $ 2.10 Recently, Job T687 was completed with the following characteristics: Number of units in the job 10 Total machine-hours 30 Direct materials $ 675 Direct labor cost $ 1,050 The estimated total...
overhead and job costs
EXERCISE 2-12 Computing Predetermined Overhead Rates and Job Costs LO 2-1, LO2-2, LV2-3 Moody Corporation uses a job-order costing system with a plantwide predetermined overhead rate based on machine-hours. At the beginning of the year, the company made the following estimates: Machine-hours required to support estimated production ...... Fixed manufacturing overhead cost....... Variable manufacturing overhead cost per machine-hour........ 100.000 $650,000 $3.00 Required: 1. Compute the plantwide predetermined overhead rate. 2. During the year, Job 400 was...
Questions:
1. What was the company’s plantwide predetermined overhead
rate?
2. How much manufacturing overhead was applied to Job P and how
much was applied to Job Q?
3. What was the total manufacturing cost assigned to Job P?
4. If Job P included 20 units, what was its unit product
cost?
5. What was the total manufacturing cost assigned to Job Q?
6. If Job Q included 30 units, what was its unit product
cost?
7. Assume that Sweeten...
XYZ 4 You have been recently hired by this company to review the costing of chemicals and reaize that maybe a predetermined overhead rate does not give an accurate cost picture 5 You remember discussing overhead cost issues in MBA641 and want to implement ABC, so you have done some research and come up with the following activity cost pools and cost drivers Budgeted Overhead CostCost driver Budgeted Level Activity for cost DriverPool Rate 30,000 Activity cost Pool 30,000 of...
1. what was the company's plant wide predetermined overhead
rate?
2. How much manufacturing overhead was applied to Job P and how
much was applied to Job Q?
3. What was the total manufacturing cost assigned to Job P?
4. If Job P included 20 units, what was its unit product
cost?
5. What was the total manufacturing cost assigned to Job Q?
6. If Job Q included 30 units, what was its unit product
cost?
7. Assume that Sweeten...
Mickley Company's plantwide predetermined overhead rate is $21.00 per direct labor-hour and its direct labor wage rate is $12.00 per hour. The following information pertains to Job A-500: Direct materials Direct labor $ 290 $ 120 Required: 1. What is the total manufacturing cost assigned to Job A-500? 2. If Job A-500 consists of 30 units, what is the unit product cost for this job? (Round your answer to 2 decimal places.) | 1. Total manufacturing cost 2. Unit product...
Problem 2-19 Multiple Predetermined Overhead Rates; Applying Overhead [LO2-1, LO2-2, LO2-4] High Desert Potteryworks makes a variety of pottery products that it sells to retailers. The company uses a job-order costing system in which departmental predetermined overhead rates are used to apply manufacturing overhead cost to jobs. The predetermined overhead rate in the Molding Department is based on machine-hours, and the rate in the Painting Department is based on direct labor- hours. At the beginning of the year, the company...