Question

1.

a.) Give an example of how to calculate a predetermined overhead rate.

b.) Using the calculated POHR in Q#1 above, show how to compute the total unit cost of a product, including direct material and direct labor.

2.

Give an example of how to compute the total cost for a job using a plantwide predetermined overhead rate.

Using the example of total job cost computed above, show how to compute the unit cost of a product.

Answer 1

1.)
a.)	Let Assume the Following
	Estimated Overhead	$ 10,000
	Estimated Direct labour Hour	$2,000
	Predetermined Overhead rate	$ 5	Per Direct Labor Hour
	(10,000 / 2,000 )
b.)	Let Assume the Following
	Product Y per unit Data
	Direct Materials	$ 100
	Direct Labor	$ 50
	Direct Labor Hour	4
	Total Unit cost of Product Y	$ 170	=100+50+(4*5)
2.)	Let Assume the Following
	Estimated Overhead	$ 100,000
	Estimated Direct labour Hour	25,000
	Product Z Data
	Units produced	1,000
	Direct Materials	$ 10,000
	Direct Labor	$ 5,000
	Total Direct Labor Hours used	1,000
	Predetermined Overhead rate	$ 4	=100000/25000
	Total Cost of Product Z
	Direct Materials	10,000
	Direct Labor	5,000
	Applied Overhead	4,000	=1000*4
a.)	Total Cost of Product Z	$ 19,000
b.)	Unit cost of Product Z	$ 19	=19000/1000