Question

8) 8) Johansen Corporation uses a predetennined overhead rate based on direct labor-hours to apply manufacturing overhead to jobs. The Corporation has provided the following estimated costs for the next year: Direct materials Direct labor Rent on factory building Sales salaries Depreciation on factory equipment Indirect labor Production supervisor's salary $ $ $ $ $ $ $ 6,000 20,000 15,000 25,000 8,000 12,000 15,000 Jameson estimates that 20,000 direct labor-hours will be worked during the year. The predetermined overhead rate per hour will be: A) $4.00 per direct labor-hour B) $3.00 per direct labor-hour C) $2.50 per direct labor-hour D) $2.79 per direct labor-hour 9) --- 9) To obtain the dollar sales volume necessary to attain a given target profit, which of the following formulas should be used? A) (Fixed expenses+ Target net profit)/Contribution margin ratio B) Fixed expenses/Contribution margin per unit C) (Fixed expenses+ Target net profitTotal contribution margin D) Target net profit/Contribution margin ratio

Answer 1

Estimated manufacturing overhead = Rent on factory building + Depreciation on factory equipment + Indirect labor + Production supervisor's salary

= 15,000 + 8,000 + 12,000 + 15,000

= $50,000

Estimated direct labor hour = 20,000

Predetermined overhead rate = Estimated manufacturing overhead/Estimated direct labor hour

= 50,000/20,000

= $2.50 per direct labor hour

Correct option is (c)

9) To obtain the dollar sales volume necessary to attain a given target profit, the following formula is used :

Dollar sales to earn desired profit = (Fixed expenses + Target net profit)/Contribution margin ratio

Correct option is (A)

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