Question

Balrd Corporation estimated its overhead costs would be $23,600 per month except for January when it pays the $172,200 annual Insurance premium on the manufacturing facility. Accordingly, the January overhead costs were expected to be $195,800 ($172,200+ $23,600). The company expected to use 7,700 direct labor hours per month except durling July, August, and September when the company expected 9,900 hours of direct labor each month to bulld inventories for high demand that normally occurs during the Christmas season. The company's actual direct labor hours were the same as the estimated hours. The company made 3,850 unlts of product in each month except July, August, and September, In which it produced 4,950 units each month. DIrect labor costs were $24.20 per unlt, and direct materials costs were $11.70 per unit Required a. Calculate a predetermined overhead rate based on direct labor hours. b. Determine the total allocated overhead cost for January, March, and August. c. Determine the cost per unit of product for January, March, and August. d. Determine the selling price for the product, assuming that the company desires to earn a gross margin of $20.60 per unlt. Complete this question by ente ring your answers in the tabs below. Req A Reqs B to D Calculate a predetermined overhead rate based on direct labor hours. (Round your answer to 2 decimal places.) Predetermined overhead rate per labor hour

Answer 1

SOLUTION

A. Predetermined Overhead rate = Estimated Overheads for the year / Estimated direct labor hours

= $455,400 / 99,000

= $4.60 per direct labor hour

Estimated overheads for the year = (23,600*11) + $195,800

= 455,400

Estimated direct labor hours = (7,700*9) + (9,900*3)

= 69,300 + 29,700 = 99,000

B. Direct Labor hours required per unit = Actual direct labor hours for the year / Total Units produced in a year

= 99,000 / [(3,850*9)+(4,950*3)]

= 99,000 / 49,500

= 2

	January	March	August
Units produced (A)	3,850	3,850	4,950
Direct Labor hours per unit (B)	2	2	2
Total Direct Labor hours (C=A*B)	7,700	7,700	9,900
Overhead rate per direct labor hour (D)	$4.60	$4.60	$4.60
Overhead allocated (C*D)	35,420	35,420	45,540

C.

	January	March	August
Direct Material	11.70	11.70	11.70
Direct Labor	24.20	24.20	24.20
Overheads (35,420/3,850) , (45,540/4,950)	9.20	9.20	9.20
Cost per Unit	45.10	45.10	45.10

D.

	January	March	August
Cost per unit	45.10	45.10	45.10
Add : Gross Margin per unit	20.60	20.60	20.60
Price per unit	65.70	65.70	65.70