Question

In: Accounting

Franklin Corporation estimated its overhead costs would be $23,100 per month except for January when it...

Franklin Corporation estimated its overhead costs would be $23,100 per month except for January when it pays the $192,240 annual insurance premium on the manufacturing facility. Accordingly, the January overhead costs were expected to be $215,340 ($192,240 + $23,100). The company expected to use 7,700 direct labor hours per month except during July, August, and September when the company expected 9,500 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 3,850 units of product in each month except July, August, and September, in which it produced 4,750 units each month. Direct labor costs were $24.40 per unit, and direct materials costs were $10.30 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 $20.20 per unit.

A:

Calculate a predetermined overhead rate based on direct labor hours. (Round your answer to 2 decimal places.)

Predetermined overhead rate

per labor hour

B:

Determine the total allocated overhead cost, the cost per unit of product and the selling price for the product for January, March, and August. Assume that the company desires to earn a gross margin of $20.20 per unit. (Do not round intermediate calculations. Round "Cost per unit" and "Selling price per unit" to 2 decimal places. Round your total allocated overhead cost to nearest whole dollar.)

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	January	March	August
Total allocated overhead cost
Cost per unit
Selling price per unit

Expert Solution

Answer-Predetermined overhead rate based on direct labor hours:-

Total overhead cost =$23,100*12+$192,240

=$277,200+192,240

=$469,440

Total direct labor hours= 7700*9+9500*3

=$69,300+ $28,500

=$97,800

Predetermined overhead rate= $469,440/ 97,800

=$4.80 per labor hour

Particulars	January	March	August
Total allocated overhead cost	$36,960	$36,960	$45,600
Cost per unit	44.30	44.30	44.30
Price	64.50	64.50	64.50

Working Note:-

Total allocated overhead cost

7700*4.80

=$36,960

7700*4.80

=$36,960

9500*4.80

=$45,600

Cost per unit:-
Direct Materials	$39,655 (3,850*10.30)	$39,655 (3,850*10.30)	$48,925 (4,750*10.30)
Direct Labor	$93,940 (3,850*24.40)	$93,940 (3,850*24.40)	$115,900 (4,750*24.40)
Overhead	$36,960	$36,960	$45,600
Total Cost	$170,555	$170,555	$210,425
No. of units	3,850	3,850	4,750
Cost per unit	$44.30	$44.30	$44.30

Price:-
Cost per unit	$44.30	$44.30	$44.30
Gross margin	$20.20	$20.20	$20.20
Price	$64.50	$64.50	$64.50

ekkarill92 answered 2 years ago

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