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Chapter 19: Q. 19-1SE_1 (page 1063)

The Oakman Company manufactures products in two departments: Mixing and Packaging. The company allocates manufacturing overhead using a single plantwide rate with direct labor hours as the allocation base. Estimated overhead costs for the year are $810,000, and estimated direct labor hours are 360,000. In October, the company incurred 20,000 direct labor hours.

Requirements

1. Compute the predetermined overhead allocation rate. Round to two decimal places.

Short Answer

Expert verified

Predetermine overhead allocation rate is $2.25.

Step by step solution

01

Predetermine overhead allocation rate

Predetermine overhead allocation rate is the per-unit overhead cost on the basis of the allocation base. It is calculated by dividing the total overhead cost by the estimated quantity of allocation base.

02

Calculation of predetermining overhead allocation rate


predeterminedoverheadallocationrate=totalestimatedoverheadcosttotalestimatedquantityoftheoverheadallocationbase=$810,000360,000=$2.25

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Most popular questions from this chapter

The Alright Manufacturing Company in Rochester, Minnesota, assembles and tests electronic components used in smartphones. Consider the following data regarding component T24 (amounts are per unit):

Direct materials cost \( 80.00

Direct labor cost 20.00

Activity-based costs allocated ?

Total manufacturing product cost ?

The activities required to build the component follow:

Activity Allocation Base Cost Allocated to

Each Unit

Start station Number of raw component chassis 4 * \) 1.50 = \( 6.00

Dip insertion Number of dip insertions ? * 0.30 = 9.60

Manual insertion Number of manual insertions 10 * 0.50 = ?

Wave solder Number of components soldered 4 * 1.90 = 7.60

Backload Number of backload insertions 7 * ? = 4.20

Test Number of testing hours 0.43 * 90.00 = ?

Defect analysis Number of defect analysis hours 0.15 * ?= 12.00

Total activity-based costs \) ?

Requirements

1. Complete the missing items for the two tables.

The Oakman Company manufactures products in two departments: Mixing and Packaging. The company allocates manufacturing overhead using a single plantwide rate with direct labor hours as the allocation base. Estimated overhead costs for the year are $810,000, and estimated direct labor hours are 360,000. In October, the company incurred 20,000 direct labor hours.

Requirements

2. Determine the amount of overhead allocated in October.

Question:Oscar, Inc. manufactures bookcases and uses an activity-based costing system. Oscar鈥檚 activity areas and related data follow:

Activity

Budgeted Cost of Activity

Allocation Base

Predetermined Overhead Allocation Rate

Materials handling

\( 240,000

Number of parts

\)1.00

Assembly

3,500,000

Number of assembling direct labor hours

17.00

Finishing

190,000

Number of finished units*

4.50

*Refers to number of units receiving the finishing activity, not the number of units transferred to Finished Goods Inventory

Oscar produced two styles of bookcases in October: the standard bookcase and an unfinished bookcase, which has fewer parts and requires no finishing. The totals for quantities, direct materials costs, and other data follow:

Product

Total Units Produced

Total Direct materials Costs

Total Direct Labor Costs

Total Number of Parts

Total Assembling Direct Labor Hours

Standard bookcase

7,000

\(91,000

\)105,000

28,000

10,500

Unfinished bookcase

7,500

82,500

75,000

22,500

7,500

Requirements

4. What price should Oscar鈥檚 managers set for unfinished bookcases to earn a net profit of $19 per bookcase?

Loiselle manufactures high-quality speakers. Suppose Loiselle is considering spending the following amounts on a new quality program:

___________________________________________________________________

Additional 20 minutes of testing for each speaker \( 625,000

Negotiating and training suppliers to obtain higher-quality

materials and on-time delivery 430,000

Redesigning the speakers to make them easier to manufacture 1,250,000

Loiselle expects this quality program to save costs as follows:

__________________________________________________

Reduce warranty repair costs \) 275,000

Avoid inspection of raw materials 580,000

Avoid rework because of fewer defective units 825,000_

It also expects this program to avoid lost profits from the following:

___________________________________________________

Lost profits due to disappointed customers $ 920,000

Lost production time due to rework 278,000

Requirements

1. Classify each of these costs into one of the four categories of quality costs (prevention, appraisal, internal failure, or external failure).

2. Should Loiselle implement the quality program? Give your reasons.

Question:Refer to Exercise E19-26. Western desires a 20% target net profit after covering all costs. Considering the total costs assigned to the Halbert engagement in Exercise E19-26, what would Western have to charge the customer to achieve that net profit? Roundto two decimal places.
See all solutions

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