Eason Company manufactures wheel rims. The controller expects the following ABC allocation rates for 2018:
Activity Allocation Base Predetermined Overhead
Materials handling Number of parts $ 4.00 per part
Machine setup Number of setups 400.00 per setup
Insertion of parts Number of parts 26.00 per part
Finishing Number of finishing hours 90.00 per hour
Eason produces two wheel rim models: standard and deluxe. Expected data for 2018 are as follows:
Parts per rim 4.0 7.0
Setups per 500 rims 18.0 18.0
Finishing hours per rim 1.0 5.5
Total direct hours per rim 5.0 6.0
The company expects to produce 500 units of each model during the year.
2. Prior to 2018, Eason used a single plantwide overhead allocation rate system with direct labor hours as the allocation base. Compute the predetermined overhead allocation rate based on direct labor hours for 2018. Use this rate to determine the estimated indirect manufacturing cost per wheel rim for each model, to the nearest cent.
Predetermined overhead allocation rate: $30.93
Per unit indirect cost for Standard model: $155
Per unit indirect cost for Deluxe model: $186
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.
2. Determine the amount of overhead allocated in October.
Question: Western, Inc. is a technology consulting firm focused on Web site development and integration of Internet business applications. The president of the company expectsto incur $640,000 of indirect costs this year, and she expects her firm to work 4,000direct labor hours. Western’s systems consultants provide direct labor at a rate of $280per hour. Clients are billed at 160% of direct labor cost. Last month, Western’s consultantsspent 170 hours on Halbert’s engagement.
1. Compute Western’s predetermined overhead allocation rate per direct labor hour.
2. Compute the total cost assigned to the Halbert engagement.
3. Compute the operating income from the Halbert engagement.
Refer to Short Exercise S19-8. Spectrum Corp. desires a 25% target gross profit after covering all product costs. Considering the total product costs assigned to the Products C and D in Short Exercise S19-8, what would Spectrum have to charge the customer to achieve that gross profit? Round to two decimal places.
Bubba and Danny are college friends planning a skiing trip to Killington before the New Year. They estimated the following for the trip:
Estimated Activity Allocation
Costs Allocation Base Bubba Danny
Food $ 400 Pounds of food eaten 24 26
Skiing 300 Number of lift tickets 2 0
Lodging 280 Number of nights 2 2
1. Bubba suggests that the costs be shared equally. Calculate the amount each person would pay.
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