Question

Adams Corporation estimated its overhead costs would be $22,500 per month except for January when it pays the $212,160 annual insurance premium on the manufacturing facility. Accordingly, the January overhead costs were expected to be $234,660 ($212,160 + $22,500). The company expected to use 7,900 direct labor hours per month except during July, August, and September when the company expected 9,100 hours of direct labor each month to build 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 3,950 units of product in each month except July, August, and September, in which it produced 4,550 units each month. Direct labor costs were $24.60 per unit, and direct materials costs were $10.60 per unit.

Predetermined overhead rate per labor hour January March August Total allocated overhead cost Cost per unit Price

Answer 1

	Predetermined overhead rate	=	$               4.90	per labor hour
		January	March	August
	Total allocated overhead cost	$       1,77,750	$       1,77,750	$       2,04,750
	Cost per unit	$                   45	$                   45	$                   45
	Price
	Workings:
	Total Overhead cost	=	$       4,82,160
	Total Direct labor hours	=	98,400
	Predetermined overhead rate	=	$               4.90
	Direct material	$           41,870	$           41,870	$           48,230
Add:	Direct labor	$           97,170	$           97,170	$       1,11,930
Add:	Overhead cost	$           38,710	$           38,710	$           44,590
	Total cost	$       1,77,750	$       1,77,750	$       2,04,750
Divide by:	Units produced	3950	3950	4550
	Cost per unit	$                   45	$                   45	$                   45
Add:	Gross margin
	Price
	Note: Provide the further details of question for price part
	Total Overhead cost	=	(22500*12)+212160
	Total Direct labor hours	=	(7900*9)+(9100*3)
	Direct material	10.6*3950	10.6*3950	4550*10.6
Add:	Direct labor	24.6*3950	24.6*3950	24.6*4550
Add:	Overhead cost	7900*4.9	7900*4.9	9100*4.9