Question

Problem 3-56 Predetermined Overhead Rate; Different Time Periods; Pricing (LO 4) [The following information applies to the questions displayed below.] Rochester Heating Systems, Inc. calculates its predetermined overhead rate on a quarterly basis. The following estimates were made for the current year Quarterly Predetermined Overhead Rate (per Estimated Manufacturing Direct-Labor direct-labor Hours 25,000 Estimated Overhead hour) First quarter $100,000 Second 96,000 16,000 12,500 14,000 quarter Third quarter 37,500 Fourth 70,000 quarter Total $303,500 67,500 The firm's main product, part number SC71, requires $100 of direct material and 20 hours of direct labor per unit. The labor rate is $10 per hour

Answer 1

		February	May
3	Price per unit	$                    418	$                 462
	Workings:
		Estimated Manufacturing Overheads	Estimated Direct - Labor Hours	Quarterly predetermined overheads rate
		(a)	(b)	(a) / (b)
	First Quarter	$           1,00,000	25,000	$                            4
	(January , February, March)
	Second Quarter	$              96,000	16,000	$                            6
	(April, May, June)
	Computation of Price per unit of part number SC71:
		February	May
	Direct Material	$                    100	$                 100
	Direct Labor (20 hours X $10)	$                    200	$                 200
	Manufacturing Overheads (20 hours X $4) ; (20 hours X $6)	$                       80	$                 120
(a)	Total Cost	$                    380	$                 420
(b)	Add: 10% Markup [(a) X 10%]	$                       38	$                    42
(a) + (b)	Price per unit	$                    418	$                 462