Campbell Corporation estimated its overhead costs would be $22,700 per month except for January when it...

Campbell Corporation estimated its overhead costs would be $22,700 per month except for January when it pays the $206,820 annual insurance premium on the manufacturing facility. Accordingly, the January overhead costs were expected to be $229,520 ($206,820 + $22,700). The company expected to use 7,600 direct labor hours per month except during July, August, and September when the company expected 9,800 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 3,800 units of product in each month except July, August, and September, in which it produced 4,900 units each month. Direct labor costs were $24.90 per unit, and direct materials costs were $10.40 per unit.

Required

Calculate a predetermined overhead rate based on direct labor hours.
Determine the total allocated overhead cost for January, March, and August.
Determine the cost per unit of product for January, March, and August.
Determine the selling price for the product, assuming that the company desires to earn a gross margin of $21.30 per unit.

Solutions

Expert Solution

	Calculation of Predetermined Overhead Rate based on Direct Labor Hours:
		January	March	August
A	Overhead Costs	$229,520	$22,700	$22,700
B	Direct Labor Hours	7,600	7,600	9,800
C	Predetermined Overhead Rate (A/B)	$30.20	$2.99	$2.32

	Determination of Total overhead Cost :
		January	March	August
A	Predetermined Overhead Rate	$30.20	$2.99	$2.32
B	Actual Hours	7,600	7,600	9,800
C	Total Overhead Cost (A*B)	$229,520	$22,700	$22,700

	Determination of Cost per unit of Product:
		January	March	August
A	Total Overhead Cost	$229,520	$22,700	$22,700
B	Units Produced	3,800	3,800	4,900
C	Overhead Cost per unit (A/B)	$60.40	$5.97	$4.63
D	Direct Material Costs	$10.40	$10.40	$10.40
E	Direct Labor Costs	$24.90	$24.90	$24.90
F	Cost per unit of Product (C+D+E)	$95.70	$41.27	$39.93

	Determination of Selling Price per unit of Product:
		January	March	August
A	Cost per unit of Product	$95.70	$41.27	$39.93
B	Gross Profit	$21.30	$21.30	$21.30
C	Selling Price per unit (A+B)	$117.00	$62.57	$61.23

ekkarill92 answered 2 years ago

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