Boom, Inc. produces paintball masks. For the production of its newest model, AMP27, material costs, employee...
Boom, Inc. produces paintball masks. For the production of its newest model, AMP27, material costs, employee wages, and other costs directly attributable to the production of one mask amount to $250. Boom uses machine hours to apply indirect (overhead) costs to each mask. The company had estimated the indirect costs for the year to be $820,000. The estimated machine hours for the year is 8,000 hours. Actual indirect costs incurred for the year amount to $900,000. If AMP27 requires 1.75 machine hours per mask, what is the total cost to produce one mask?
Homework Answers
Material, labor and other direct costs = $250 per mask
Estimated indirect costs = $820,000
Estimated machine hour = 8,000
Predetermined overhead rate = Estimated indirect costs/Estimated machine hour
= 820,000/8,000
= $102.5 per machine hour
Machine hour used in making one mask = 1.75
Over applied to make one mask = Machine hour used in making one mask x Predetermined overhead rate
= 1.75 x 102.5
= $179.375
total cost to produce one mask = Material, labor and other direct costs + Over applied to make one mask
= 250 + 179.375
= $429.38
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