Log out Go to App
Go to App

Learning Materials

Features

Discover

Chapter 19: Q.19-1SE_2 (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

2. Determine the amount of overhead allocated in October.

Short Answer

Expert verified

Overhead in October is $45,000.

Step by step solution

01

Overhead cost.

Overhead costs are the indirect costs that are incurred in the production or non-production activities. Indirect costs are not directly involved in the process but help to make the process efficient. Due to this reason, these costs cannot be directly attributed to any product or service.

Overheads are reallocated based on some to get the idea of the per-unit cost and total cost of any product or service.

02

Overhead allocation in October

Octoberoverhead=predetermineoverheadallocationrate×allocationbaseforoctober=$2.25×20,000=$45,000

Unlock Step-by-Step Solutions & Ace Your Exams!

  • Full Textbook Solutions

    Get detailed explanations and key concepts

  • Unlimited Al creation

    Al flashcards, explanations, exams and more...

  • Ads-free access

    To over 500 millions flashcards

  • Money-back guarantee

    We refund you if you fail your exam.

Start your free trial

Over 30 million students worldwide already upgrade their learning with Vaia!

One App. One Place for Learning.

All the tools & learning materials you need for study success - in one app.

Get started for free

Most popular questions from this chapter

The following information is provided for Orbit Antenna Corp., which manufactures two products: Lo-Gain antennas and Hi-Gain antennas for use in remote areas.

Activity Cost Allocation Base

Setup \( 58,000 Number of setups

Machine maintenance 30,000 Number of machine hours

Total indirect manufacturing costs \) 88,000

Lo-Gain Hi-Gain Total

Direct labor hours 1,200 3,800 5,000

Number of setups 40 40 80

Number of machine hours 3,000 2,000 5,000

Orbit Antenna plans to produce 125 Lo-Gain antennas and 225 Hi-Gain antennas.

Requirements

1. Compute the indirect manufacturing cost per unit using direct labor hours for the single plantwide predetermined overhead allocation rate.

Harcourt Pharmaceuticals manufactures an over-the-counter allergy medication. The company sells both large commercial containers of 1,000 capsules to health care facilities and travel packs of 20 capsules to shops in airports, train stations, and hotels. The following information has been developed to determine if an activity-based costing system would be beneficial:

Activity Estimated Estimated Quantity

Indirect Cost Allocation Base of Allocation Base

Materials handling \( 96,000 Number of kilos 24,000 kilos

Packaging 210,000 Number of machine hours 3,000 hours

Quality assurance 114,000 Number of samples 1,900 samples

Total indirect costs \) 420,000

Other production information includes the following:

Commercial Containers Travel Packs

Units produced 2,800 containers 51,000 packs

Weight in kilos 9,800 5,100

Machine hours 1,960 510

Number of samples 560 765

Requirements

1. Harcourt’s original single plantwide overhead allocation rate system allocated indirect costs to products at $140.00 per machine hour. Compute the total indirect costs allocated to the commercial containers and to the travel packs under the original system. Then compute the indirect cost per unit for each product. Round to two decimal places.

Question:Newton Company has analyzed its production process and identified two primary activities. These activities, their allocation bases, and their estimated costs are listed below.

Activity

Allocation Base

Estimated Activity

Estimated Costs

Purchasing

Number of purchase orders

200 purchase orders

\( 10,000

Materials Handling

Number of parts

15,000 parts

\) 7,500

The company manufactures two products: Regular and Super. The products use the following resources in March:

Regular Super

Number of purchase orders 5 purchase orders 7 purchase orders

Number of parts 600 parts 750 parts

5. Compute the predetermined overhead allocation rates using activity-based costing.

6. Determine the amount of overhead allocated to Regular products in March.

7. Determine the amount of overhead allocated to Super products in March.

Harcourt Pharmaceuticals manufactures an over-the-counter allergy medication. The company sells both large commercial containers of 1,000 capsules to health care facilities and travel packs of 20 capsules to shops in airports, train stations, and hotels. The following information has been developed to determine if an activity-based costing system would be beneficial:

Activity Estimated Estimated Quantity

Indirect Cost Allocation Base of Allocation Base

Materials handling \( 96,000 Number of kilos 24,000 kilos

Packaging 210,000 Number of machine hours 3,000 hours

Quality assurance 114,000 Number of samples 1,900 samples

Total indirect costs \) 420,000

Other production information includes the following:

Commercial Containers Travel Packs

Units produced 2,800 containers 51,000 packs

Weight in kilos 9,800 5,100

Machine hours 1,960 510

Number of samples 560 765

Requirements

3. Use the predetermined overhead allocation rates to compute the activity-based costs per unit of the commercial containers and the travel packs. Round to two decimal places. (Hint: First compute the total activity-based costs allocated to each product line, and then compute the cost per unit.)

What are the inventory accounts used in JIT costing?
See all solutions

Recommended explanations on Business Studies Textbooks

Influences On Business

Read Explanation

Financial Performance

Read Explanation

Business Development

Read Explanation

Organizational Communication

Read Explanation

Managers

Read Explanation

Change Management

Read Explanation
View all explanations

What do you think about this solution?

We value your feedback to improve our textbook solutions.

Study anywhere. Anytime. Across all devices.

Sign-up for free