Question

Elton Company manufactures wheel rims. The controller expects the following The company expects to produce 500 units of each model during the year. ABC allocation rates for 2018: (Click the icon to view the allocation rates.) Read the requirements. Elton produces two wheel rim models: standard and deluxe. Expected data for 2018 are as follows: (Click the icon to view the expected data.) Requirement 1. Compute the total estimated indirect manufacturing cost for 2018. Begin by selecting the formula to compute the total estimated overhead (OH) costs. Total estimated overhead costs X Now compute the total estimated indirect manufacturing cost for 2018. Total Estimated Activity Indirect Manufacturing Cost Materials handling Machine setup Insertion of parts Finishing Total estimated indirect manufacturing cost Requirement 2. Prior to 2018, Elton used a single plantwide overhead allocation rate system with direct labor hours as the allocation base. Compute the predetermined overhead allocation rate based on direct labor hours for 2018. Use this rate to determine the estimated indirect manufacturing cost per wheel rim for each model, to the nearest cent. First, select the formula, and then enter the amounts to compute the allocation rate. Allocation rate Use the single plantwide allocation rate to determine the indirect manufacturing cost per wheel rim for each model, to the nearest cent. Indirect manufacturing cost per rim: Standard model: Deluxe model:

expected data starts with parts per rim standard | deluxe

Answer 1

1	Total estimated overhead cost=Predetermined overhead allocation rate*Total allocation base
	Materials handling:
	Predetermined overhead allocation rate=$6 per part
	Total allocation base=Total number of parts:
					Standard	Deluxe	Total
	Expected production			a	500	500
	Parts per rim			b	8	9
	Total number of parts			c=a*b	4000	4500	8500
	Total estimated overhead cost=6*8500=$ 51000
	Machine setup:
	Predetermined overhead allocation rate=$700 per setup
	Total allocation base=Total number of setups
					Standard	Deluxe	Total
	Expected production			a	500	500
	Setups per 500 rims			b	12	12
	Total number of setups			c=(a/500)*b	12	12	24
	Total estimated overhead cost=700*24=$ 16800
	Insertion of parts:
	Predetermined overhead allocation rate=$23 per part
	Total allocation base=Total number of parts=8500
	Total estimated overhead cost=23*8500=$ 195500
	Finishing:
	Predetermined overhead allocation rate=$70 per hour
	Total allocation base=Total direct labor hours:
					Standard	Deluxe	Total
	Expected production			a	500	500
	Finishing hours per rim			b	6	6.5
	Total number of finishing hours			c=a*b	3000	3250	6250
	Total estimated overhead cost=70*6250=$ 437500
	Total estimated indirect manufacturing cost:
				$
	Materials handling			51000
	Machine setup			16800
	Insertion of parts			195500
	Finishing			437500
	Total			700800
2	Allocation rate=Total estimated indirect manufacturing cost/Total direct labor hours
	Indirect manufacturing cost per rim:
					Standard	Deluxe	Total
	Expected production			a	500	500
	Total DLHs per rim			b	7	8
	Total number of DLHs			c=a*b	3500	4000	7500
	Allocation rate=700800/7500=$ 93.44 per DLH

a 93.44 b 4000 Indirect manufacturing cost per rim: Allocation rate Total number of DLHs Indirect manufacturing cost allocated c=a*b Expected production (in rims) d Indirect manufacturing cost per rim c/d 93.44 3500 327040 500 373760 5001 654.08 747.52 Allocated Allocated Mfg. OH cost Mfg. OH cost 3 Activity per Rim per Rim Materials handling (PDOH allocation rate*Parts per rim) Machine setup (PDOH allocation rate*Setups per rim) Insertion of parts (PDOH allocation rate *Parts per rim) Finishing (PDOH allocation rate*Finishing hours per rim) Total indirect cost per rim Standard Deluxe 48 54 (6*8) (6*9) 16.8 16.8 700*(12/500) 700*(12/500) 184 207 (23*8) (23*9) 420 455 (70*6) (70*6.5) 668.8 732.8