Question

Donovan & Parents produces soccer shorts and jerseys for youth leagues. Most of the production is done by machine. Data on operations and costs for March follow.

	Jerseys			Shorts			Total
Units produced		9,900			5,500			15,400
Machine-hours used		1,020			770			1,790
Direct labor-hours		200			140			340
Direct materials costs	$	12,200		$	7,900		$	20,100
Direct labor costs	$	4,000		$	2,800		$	6,800
Manufacturing overhead costs							$	21,493

Management asks the firm’s cost accountant to compute product costs. The accountant first assigns overhead costs to two pools: overhead related to direct materials and overhead related to machine-hours. The analysis of overhead accounts by the cost accountant follows.

Account	Amount			Related to:
Utilities	$	4,000		Machine-hours
Supplies		2,870		Materials
Machine depreciation and maintenance		9,008		Machine-hours
Purchasing and storing materials		2,155		Materials
Miscellaneous		3,460		Machine-hours

Required:

a. Compute the predetermined overhead rates assuming that Donovan uses machine-hours to allocate machine-related overhead costs and materials costs to allocate materials-related overhead costs.

b. Compute the total costs of production and the cost per unit for each of the two products for March.

Complete this question by entering your answers in the tabs below. Required A Required B Compute the predetermined overhead rates assuming that Donovan uses machine-hours to allocate machine-related overhead costs and materials costs to allocate materials-related overhead costs. (Round "Machine-related overhead" rate to 2 decimal places and enter "Materials related overhead" rate as a whole percentage (i.e., 32).) Machine-hour related Materials related Overhead Rate per hour % < Required A Required B >

Answer 1

Requirement A	Overhead Rate
	Machine Hour Related	9.2	per Hour
	Material Related	25%
Requirement B	Jerseys	Shorts
	Total Cost	28,634	23,759
	Cost per Unit	2.89	4.32
	Working
Requirement A
	Predetermined Overhaed Rate
	Machine Hour Related
	Total Overhead Cost	16,468
	( 4,000 + 9,008 + 3,460 )
	Machine Hours	1,790
	Predetermined Overhaed Rate	9.2
	( 16,468 / 1,790 )
	Predetermined Overhaed Rate
	Material Related
	Total Overhead Cost	5,025
	( 2,870 + 2,155 )
	Machine Hours	20,100
	Predetermined Overhaed Rate	25%
	( 16,468 / 1,790 )
Requirement B	Total Cost and Cost Per Unit
		Jerseys	Shorts
	Direct Material	12,200	7,900
	Direct Labor	4,000	6,800
	Overhead :
	Machine Hours Related	9,384	7,084
	Material related	3,050	1,975
	Total Cost	28,634	23,759
	Unit Produced	9,900	5,500
	Cost per Unit	2.89	4.32
		Jerseys	Shorts
	Overhead :
	Machine Hours Related	=1020*9.2	=770*9.2
	Material related	=12200*25%	=7900*25%