Juguette’s Boise plant produce
Juguette’s Boise plant produces two types of battery-operatedtoys: robots and race cars. The Boise plant uses a plantwide ratebased on direct labor hours to assign its overhead costs. Thecompany has the following estimated and actual data for the comingyear:
|
Estimated overhead |
$350,000 |
|
Expected activity (direct labor hours) |
50,000 |
|
Actual activity (direct labor hours): |
|
|
Robots |
10,000 |
|
Race cars |
40,000 |
|
Units produced: |
|
|
Robots |
50,000 |
|
Race cars |
250,000 |
- Calculate the predetermined plantwide overhead rate.
- Calculate the applied overhead for each product.
- Calculate the overhead cost per unit for each product.
Answer:
Solution:
Pre-determined plantwide overhead rate = EstimatedOverhead Costs / Estimated Activity units
Note: Here direct labor hours is the allocation base / activitybase
Therefore,
Predetermined plantwide Overhead rate = Estimated Overhead Costs/ Estimated direct labor hours
= $350,000 / 50,000 direct labor hours
= $7 per direct labor hours
Applied Overhead = Overhead Rate * Actual Activityoutput
Note: Here Actual activity output for robots = 10,000 directlabor hours
Actual activity output for race cars = 40,000direct labor hours
Therefore,
Applied Overhead for Robots = $7 * 10,000 direct labor hours
= $70,000
Applied Overhead for Race Cars = $7 * 40,000 direct laborhours
= $280,000
Overhead Cost per unit = TotalOverhead Cost / Total Units
Overhead cost per unit for robots = $70,000 / 50,000 units
= $1.40
Overhead Cost per unit for Race cars = $280,000 / 250,000units
= $1.12
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