Thornton Corporation estimated its overhead costs would be $23,200 per month exc
ID: 2338005 • Letter: T
Question
Thornton Corporation estimated its overhead costs would be $23,200 per month except for January when it pays the $128,580 annual insurance premium on the manufacturing facility. Accordingly, the January overhead costs were expected to be $151,780 ($128,580 $23,200). The company expected to use 7,700 direct labor hours per month except during July, August, and September when the company expected 9,200 hours of direct labor each month to build inventories for high demand that normally occurs during the Christmas season. The company's actual direct labor hours were the same as the estimated hours. The company made 3,850 units of product in each month except July, August, and September, in which it produced 4,600 units each month. Direct labor costs were $23.20 per unit, and direct materials costs were $11.50 per unit. Required a. Calculate a predetermined overhead rate based on direct labor hours. b. Determine the total allocated overhead cost for January, March, and August. c. Determine the cost per unit of product for January, March, and August. d. Determine the selling price for the product, assuming that the company desires to earn a gross margin of $20.90 per unit. Complete this question by entering your answers in the tabs below Req AReqs B to D Calculate a predetermined overhead rate based on direct labor hours. (Round your answer to 2 decimal places.) Predetermined overhead rate per labor hour Reg A Reqs B to D >Explanation / Answer
a. Predetermined overhead rate = Estimated Total Overhead / Expected Total Direct Labor Hours.
Estimated total overhead = $ 23,200 x 12 + $ 128,580 = $ 406,980.
Expected total direct labor hours = 7,700 hous x 9 + 9,200 hours x 3 = 96,900.
Predetermined overhead rate = $ 406,980 / 96,900 = $ 4.20 per direct labor hour.
b. Total allocated overhead cost :
January : 7,700 hours x $ 4.20 = $ 32,340.
March : 7,700 hours x $ 4.20 = $ 32,340.
August : 9,200 x $ 4.20 = $ 38,640.
c. Cost per unit : Direct Material cost per unit + Direct Labor cost per unit + Overhead cost per unit.
January : $ 11.50 + $ 23.20 + $ 32,340 / 3,850 = $ 43.10
March : $ 43,10.
August : $ 11.50 + $ 23.20 + $ 38,640 / 4,600 = $ 43.10.
d.
January March August Total Allocated Overhead Cost $ 32,340 $ 32,340 $ 38,640 Cost per Unit 43,10 43.10 43.10 Price $ 64 $ 64 $ 64Related Questions
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