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Plantwide Overhead Rate, Activity-Based Costing, Job Costs Foto-Fast Copy Shop provides a variety of photocopying and...
Plantwide Overhead Rate, Activity-Based Costing, Job Costs
Foto-Fast Copy Shop provides a variety of photocopying and printing services. On June 5, the owner invested in some computer-aided photography equipment that enables customers to reproduce a picture or illustration, input it digitally into the computer, enter text into the computer, and then print out a four-color professional quality brochure. Prior to the purchase of this equipment, Foto-Fast Copy Shop's overhead averaged $40,000 per year. After the installation of the new equipment, the total overhead increased to $88,000 per year. Foto-Fast Copy Shop has always costed jobs on the basis of actual materials and labor plus overhead assigned using a predetermined overhead rate based on direct labor hours. Budgeted direct labor hours for the year are 8,000, and the wage rate is $8 per hour.
Required:
1.
What was the predetermined overhead rate prior to the purchase of
the new equipment?
$ per direct labor hour
2.
What was the predetermined overhead rate after the new equipment
was purchased?
$ per direct labor hour
3. Suppose Rick Anselm brought in several items he wanted photocopied. The job required 700 sheets of paper at $0.01 each and 48 minutes of direct labor time. What would have been the cost of Rick's job on May 20? On June 20? If required, round your answers to the nearest cent.
| Total job cost | |
| May 20 | $ |
| June 20 | $ |
4. Suppose that the owner decides to calculate two overhead rates, one for the photocopying area based on direct labor hours as before, and one for the computer-aided printing area based on machine time. Estimated overhead applicable to the computer-aided printing area is $48,000, and forecasted usage of the machines is 2,000 hours. What are the two overhead rates? If required, round your answers to the nearest cent.
| Overhead Rate | ||
| Photo-copying | $ | per direct labor hour |
| Computer-aided printing | $ | per machine hour |
Which overhead rate system is better—one rate or two?
Solutions
Expert Solution
| a) Predetermined overhead rate prior to the purchase of the new equipment | |||||||||
| predetermined rate = overhead/budgeted direct labour hour | |||||||||
| predetermined rate = 40000/8000 = 5 per direct labour hrs | |||||||||
| b) predetermined overhead rate after the new equipment purchased | |||||||||
| predetermined rate = overhead/budgeted direct labour hours | |||||||||
| predetermined rate = 88000/8000 = 11per direct labour hrs | |||||||||
| c) cost of job on may & june | |||||||||
| particulars | May-20 | Jun-20 | |||||||
| direct material(700*0.01) | 7 | 7 | |||||||
| direct labour (0.8*8) | 6.4 | 6.4 | |||||||
| applied overhead (0.8*5),(0.8*11) | 4 | 8.8 | |||||||
| total job cost | 17.4 | 22.2 | |||||||
| here 0.8 = 48minutes/60 | |||||||||
| d) calculation of overhead rate | |||||||||
| photocopy overhead rate = 40000/8000 = 5 per direct labor hrs | |||||||||
| computer aided printing overhead rate = 48000/2000 = 24 per machine hours | |||||||||
| two rate overhead system is better it shows better effect relationship between activity & overhead cost | |||||||||
ekkarill92 answered 1 year agoRelated Solutions
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Foto-Fast Copy Shop provides a variety of photocopying and
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reproduce a picture or illustration, input it digitally into the
computer, enter text into the computer, and then print out a
four-color professional quality brochure. Prior to the purchase of
this equipment, Foto-Fast Copy Shop's overhead averaged $40,000 per
year. After the installation of the new equipment,...
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