Predetermined Overhead Rate; Different Time Periods; Pricing
Troy Electronics Company calculates its predetermined overhead rate on a quarterly basis. The following estimates were made for the current year.
| Estimated Manufacturing Overhead | Estimated Direct-Labor Hours | Quarterly Predetermined Overhead Rate (per direct-labor hour) |
First quarter | $100,000 | 25,000 | ? |
Second quarter | 80,000 | 16,000 | ? |
Third quarter | 50,000 | 12,500 | ? |
Fourth quarter | 70,000 | 14,000 | ? |
Total | $300,000 | 67,500 |
|
The firm's main product, part number A200, requires $100 of direct material and 20 hours of direct labor per unit. The labor rate is $15 per hour.
Required:
1. Calculate the firm's quarterly predetermined overhead rate for each quarter.
2. Determine the cost of one unit of part number A200 if it is manufactured in January versus April.
3. Suppose the company's pricing policy calls for a 10 percent markup over cost. Calculate the price to be charged for a unit of part number A200 if it is produced in January versus April.
4. Calculate the company's predetermined overhead rate for the year if the rate is calculated annually.
5. Based on your answer to requirement (4), what is the cost of a unit of part number A200 if it is manufactured in January? In April?
6. What is the price of a unit of part A200 if the predetermined overhead rate is calculated annually?
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