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Randy Company produces candy sticks (hooked and straight). Both products pass through two producing departments. The...

Randy Company produces candy sticks (hooked and straight). Both products pass through two producing departments. The hooked stick's production is much more labor-intensive than the straight stick. The straight stick is also more popular. The following data have been gathered for the two products:

Product Data

Hooked Straight

Units produced per year 200,000 2,000,000

Direct labor hours 10,000 40,000

Machine hours 10,000 70,000

Total overhead costs equal $400,000. Randy applies overhead based on direct labor hours. Required: If required, round your answers to the nearest cent.

A. Calculate the plantwide overhead rate based on direct labor hours. $fill in the blank 1 per direct labor hour

B. Using the plantwide overhead rate, calculate the overhead cost per unit for hooked sticks. $fill in the blank 2 per unit

C. Using the plantwide overhead rate, calculate the overhead cost per unit for straight sticks. $fill in the blank 3 per unit

D. Recalculate the plantwide overhead rate assuming Randy Company applies overhead based on machine hours. $fill in the blank 4 per machine hour

E. Assuming that the per-unit prime cost for hooked sticks is $0.47, what is the per-unit cost using the overhead rate developed in part A? $fill in the blank 5

F. Assuming that the per-unit prime cost for hooked sticks is $0.47, what is the per-unit cost using the overhead rate developed in part D? $fill in the blank 6

Solutions

Expert Solution

A)Total direct labour hours= 10,000 + 40,000 hours = 50,000 hours

Plantwide overhead rate based on direct labour hours= Total overhead cost/ Total direct labour hours

=$400,000/50,000

=$ 8 per direct labour hour

B)Total overhead cost of hooked sticks based on direct labour hours

= Plantwide overhead rate x Direct labour hours used in hooked sticks

=$8 x 10,000

=$80,000

Overhead cost per unit for hooked sticks= Total overhead cost for hooked sticks/No of hooked sticks produced

=$80,000/200,000

=$0.40 per unit

C)Total overhead cost of Straight sticks based on direct labour hours

= Plantwide overhead rate x Direct labour hours used in Straight sticks

=$8 x 40,000

=$320,000

Overhead cost per unit for Straight sticks= Total overhead cost for hooked sticks/No of Straight sticks produced

=$320,000/2,000,000

=$0.16 per unit

D)Total Machine Hours= 10,000 + 70,000 =80,000 hours

Plantwide overhead rate based on machine hours= Total overhead cost/ Total machine hours

=$400,000/80,000

=$ 5 per machine hour

E)Per-unit cost of hooked sticks using the overhead rate developed in part A

= Prime cost per unit of hooked sticks + overhead cost per unit of hooked sticks based on based on direct labour hours

=$0.47+0.40

=$0.87 per unit

F)Total overhead cost of hooked sticks based on machine hours

= Plantwide overhead rate based on machine hours x Machine hours used in hooked sticks

=$5 x 10,000

=$50,000

Overhead cost per unit of hooked sticks based on machine hours

=Total overhead cost of hooked sticks based on machine hours/No of hooked sticks produced

=$50,000/200,000

=$0.25 per unit

Per unit cost of hooked sticks using the overhead rate developed in part D

=Prime cost per unit of hooked sticks + overhead cost per unit based on based on machine hours

=$0.47+0.25

=$0.72 per unit

ekkarill92 answered 1 year ago

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