Question

For candy apples, how would I measure direct materials cost, direct labor cost, and compute predetermined overhead rates?

Answer 1

1. For Candy Apples, One need to prepare coating first so that Apple can be coated with a layer of sugar. Most common coating I hear ismade from Sugar(white or brown), Corn Syrup, Water, Cinnamon. To reach at a unique rate of material, One need to prepare in coating for a batch of few Apples.

2. Let's say X litres of Coating is Applied on Y number of Apples. One need to track the costing for X litres of coating and divide it by Y to reach the amount spend on coating applied per Apple.

3. An Apple cost can be directly treated as Direct Material cost.

4. For Direct Labout cost, One need to gauge how much hours are spent on One batch. Depending on the compensation given to labour for specified hours, Labour rate per hour can be reached upon. Divinding that rate per hour by number of Apple candy produced in 1hour can be taken as an estimated Labour cost per Candy.

5. For Overhead rate, One need to take all the fixed cost in consideration and estimating the budgeted number of units to be produced in whole month. With that, we can compute Overhead rate per unit.

Please note all the rate calculated will be estimated and standards costing should be reviewed on periodic basis so that it can be revised if required.