14. The computation of unit product costs involves an averaging process in: Job-
ID: 2334505 • Letter: 1
Question
14. The computation of unit product costs involves an averaging process in: Job-order costing Process costing No Yes Yes No No No 15. The Staple Company uses predetermined overhead rates to apply manufacturing overhead to jobs. The predetermined overhead rate is based on labor cost in Dept. A and on machine hours in Dept. B. At the beginning of the year, the company made the following estimates: Dept. A Dept. B $30,000 $40,000 Direct labor cost Manufacturing overhead... 60,000 50,000 Direct labor hours Machine hours What predetermined overhead rates would be used in Dept A and Dept B, respectively? a, 50% and $8.00 b, 50% and $5.00 c, $15 and i 10% d, 200% and $5 6,000 2,000 8,000 10,000 16. Determining the basis for applying manufacturing overhead costs in a job-order costing system involves: a Primarily the accumulation of direct labor hours since virtually all overhead costs are driven byExplanation / Answer
Answer No 15
A pre-determined overhead rate is the rate used to apply manufacturing overhead to work-in-process inventory. The pre-determined overhead rate is calculated before the period begins. The first step is to estimate the amount of the activity base that will be required to support operations in the upcoming period. The second step is to estimate the total manufacturing cost at that level of activity. The third step is to compute the predetermined overhead rate by dividing the estimated total manufacturing overhead costs by the estimated total amount of cost driver or activity base.
Computation of Pre determine overheads rate in Dept A (based on Labour cost)
Direct Labour Cost = $ 30,000
Direct Manf Overheads = $ 60000
Predetermine Overheads Rate = Manuf Overheads / Direct Labour Cost
= 60000/30000 = 200%
Computation of Predetermine overheads rate in Dept B (based on Machibe Hours )
Manufacturing Overheads = $ 50000
Machine Hours = 10000 Hrs
Predetermine overheads rate = Manf Overheads / Machine Hrs = 50000/10000 = $5 per hrs
Hence the correct answer is (d)
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