Question

1） Discuss Predetermined Overhead Rate and how it is applied to determine product cost. Identify 3 common manufacturing activities and indicate the best "cost driver" to measure the respective activity costs to the cost object (product/job).

2 ） If you run a food truck selling hamburgers: A) identify the cost object of your business; B) identify 2 examples of direct costs and 2 examples of indirect costs of your business and explain why those costs are direct and indirect costs respectively.

Answer 1

o puedetesemined Overhead Rates A predetermined overhead Rate is used to apply the estimated cost of manufacturing overheads to cost object, it is part of Absorption Costing Calculation, it could include a known Cost and then applying an overhead rate to this an unknown Cost, feamullas predetermined Overhead =) estimeited manufacturing Overhead Rate estimated total production Cest in unit estimated manufacturing example: - overhead of $ 1800000 and will apply overhead to unit produced based on 7,20,000 machine hours. Overhead Rate $ 1800,000 = $2,5 72000

electricity Cost of assigned cost doives Cost douiver 0 Selling Cost Alb. of customer o to sun machine hawes * material handling - No of material Regiustions o pwucharing department - No: perishes machine Order puschasing material (Activity) No. of peowheese bequisitim (lost drive) estimated ovegchead cost' $ 500000 total activity 10,000 ABC Rate per Activity $500000 =$50 Loooo machine set up (Adivity). No. of set up (Cest driver) Cest =$15oon total actility = loo = $ | Jooba - $100

- if you run a food touch selling hambiosgous- disect Coast :the ingredients + labour cotho makes and serve (cheesce+vegitable etes) inelirect Cost : cost of stove, utensils spoon disable plates etc. Cost object : (slemes hamburgees (food) explanations – selling hamburgers include direct cost like Cheese vegitables - Bun eta that cost can be easily baced to a unit of product, direct material and direct labour. ☺ indicectly cost art cost that are not directly accelentable to a cost object. hot divadly, Gelateel to production such as Cost of slove, ofensils, which are