Question

In: Accounting

Required information [The following information applies to the questions displayed below.] The controller for Tender Bird...

Required information

[The following information applies to the questions displayed below.]

The controller for Tender Bird Poultry, Inc. estimates that the company’s fixed overhead is $100,000 per year. She also has determined that the variable overhead is approximately $0.15 per chicken raised and sold. Since the firm has a single product, overhead is applied on the basis of output units, chickens raised and sold.

Required:

1. Calculate the predetermined overhead rate under each of the following output predictions: (Round your answers to 2 decimal places.)

Volumes Overhead Rate
200,000 per chicken
300,000 per chicken
400,000 per chicken

2. Does the predetermined overhead rate change in proportion to the change in predicted production?

  • Yes

  • No

Solutions

Expert Solution

Calculation of the predetermined overhead rate
Volume $ 200,000 $ 300,000 $ 400,000
Fixed Overhead 100000 100000 100000
Per unit fixed overhead $       0.50 $       0.33 $       0.25
( Fixed overhead/ volume)
Variable overhead per chicken $       0.15 $       0.15 $       0.15
Overhead Rate per unit $       0.65 $       0.48 $       0.40
(Per unit fixed overhead+ variable overhead)
Yes, The predetermined overhead rate changes in proportion to the change in predicted production.
It decreased with increase in the number of units

ekkarill92 answered 11 months ago
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