Answered: Figuring a predetermined overhead rate…

Figuring a predetermined overhead rate using direct materials as the allocation base. $130500 estimated manufacturing overhead cost and $87000 as allocation base. Then whats next in the formula

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter4: Job Order Costing

Section: Chapter Questions

Problem 4TP: If a company bases its predetermined overhead rate on 100,000 machine hours, and It actually has...

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Concept explainers

Overheads

In cost accounting, overhead refers to those expenses which occur during the operating of a business. Overhead includes the fixed, variable, or semi-variable which is not directly involved with a company product or service. It is very important to analyze overhead expense as it helps the company in determining how much a company must charge for its products and services so that they can generate profit. Overhead expenses depend upon the nature of the business operations.

Question

Figuring a predetermined overhead rate using direct materials as the allocation base. $130500 estimated manufacturing overhead cost and $87000 as allocation base. Then whats next in the formula

Definition Definition Total cost of procuring or producing a product or the cost that an individual or business owner undertakes for the manufacturing of goods.

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Overhead costs are assigned to each product based on __________________. A. the proportion of that products use of the cost driver B. a predetermined overhead rate for a single cost driver C. price of the product D. machine hours per product
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Using the pre-determined overhead rate calculated above, calculate the overhead that would be allocated to a product that uses 3.5 hours of machine time. What will happen if actual overhead costs turn out to be higher or lower than this calculation? predetermined overhead rate calculated above: $25/ hour of machine run time
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1) Using the information in Annex 2, prepare an overhead summary, showing clearly the totaloverheads for each department. Prepare the following calculations using the total overhead foreach department:i. Calculate the Overhead Absorption Rate (OAR) based on Labour hours.ii. Calculate Overhead Absorption Rate (OAR) based on number of units (for 3000 units)iii. Calculate the Total Cost per unit from the available information (use OAR based on costper unit)
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