Question

Scenario I: Goodmark Company produces two products: scented and regular birthday cards. Goodmark uses a plantwide rate based on direct labor hours. The estimated and actual data for the coming year are provided below:

Estimated overhead		$720,000
Expected activity (direct labor hours)		180,000
Actual activity (direct labor hours)
Scented cards		20,000
Regular cards		160,000
Units produced
Scented		20,000
Regular		200,000

Required:

1.	Calculate the following:
a.	The predetermined overhead plantwide rate (round to the nearest cent): $ per direct labor hour
b.	Applied overhead for each product (round to the nearest dollar):
	Scented: $ Regular: $
c.	Overhead per unit for each product (round to the nearest cent):
	Scented: $ Regular: $

Answer 1

a.

Estimated overhead = $720,000

Estimated Direct labor hours = 180,000

Predetermined overhead rate = Estimated overhead / Estimated Direct labor hours

= 720,000 / 180,000

= $ 4 per Direct labor hours

b.

Overhead applied to Scented cards = Actual Direct labor hours used in Scented cards x Predetermined overhead rate

= 20,000 x 4

= $ 80,000

Overhead applied to Regular cards = Actual Direct labor hours used in Regular cards x Predetermined overhead rate

= 160,000 x 4

= $ 640,000

Scented:	$80,000
Regular:	$640,000

c.

Overhead per unit of Scented cards = Overhead applied to Scented cards / Number of units produce

= 80,000 / 20,000

= $4

Overhead applied to Regular cards = Overhead applied to Regular cards / Number of units produce

= 640,000 / 20,000

= $ 3.2

Scented:	$4
Regular:	$3.2

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