In: Accounting
Munoz Corporation estimated its overhead costs would be $23,900
per month except for January when it pays the $120,180 annual
insurance premium on the manufacturing facility. Accordingly, the
January overhead costs were expected to be $144,080 ($120,180 +
$23,900). The company expected to use 7,500 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 3,750 units of
product in each month except July, August, and September, in which
it produced 4,900 units each month. Direct labor costs were $24.20
per unit, and direct materials costs were $10.10 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 $21.20 per unit.
1. Predetermined overhead rate based on direct labor hours is $4.2 | ||||||
2. Total allocated overhead cost | ||||||
January $ 31500 | ||||||
March $31500 | ||||||
August $ 41160 | ||||||
3. Cost per unit is $ 66.90 | ||||||
4. Desired selling price is $88.10 | ||||||
Basic Information | ||||||
Particulars | Overhead cost | Insurance | Direct labour Hours | Produced units | Direct labour Cost per hour | Direct material cost per Unit |
January | 23,900 | 10,015 | 7,500 | 3,750 | 24 | 10 |
February | 23,900 | 10,015 | 7,500 | 3,750 | 24 | 10 |
March | 23,900 | 10,015 | 7,500 | 3,750 | 24 | 10 |
April | 23,900 | 10,015 | 7,500 | 3,750 | 24 | 10 |
May | 23,900 | 10,015 | 7,500 | 3,750 | 24 | 10 |
June | 23,900 | 10,015 | 7,500 | 3,750 | 24 | 10 |
July | 23,900 | 10,015 | 9,800 | 4,900 | 24 | 10 |
August | 23,900 | 10,015 | 9,800 | 4,900 | 24 | 10 |
September | 23,900 | 10,015 | 9,800 | 4,900 | 24 | 10 |
October | 23,900 | 10,015 | 7,500 | 3,750 | 24 | 10 |
November | 23,900 | 10,015 | 7,500 | 3,750 | 24 | 10 |
December | 23,900 | 10,015 | 7,500 | 3,750 | 24 | 10 |
Total | 2,86,800 | 1,20,180 | 96,900 | 48,450 | ||
Predetermained Overhead Rate | ||||||
Particulars | Values | |||||
Overhead cost for the year | 4,06,980 | |||||
Total Direct labour Hours | 96,900 | |||||
Overhead Rate | 4.20 | |||||
Calculation of total allocation overhead | ||||||
Particulars | January | March | August | |||
Overhead rate | 4.20 | 4.20 | 4.20 | |||
Direct labour Hours | 7,500 | 7,500 | 9,800 | |||
Total allocated cost | 31,500.00 | 31,500.00 | 41,160.00 | |||
Calculation of cost per unit | ||||||
Particulars | January | March | August | |||
Direct material Cost | 37,875 | 37,875 | 49,490 | |||
Direct labour Cost | 1,81,500 | 1,81,500 | 2,37,160 | |||
Overhead | 31,500 | 31,500 | 41,160 |
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