<p>The problem in full:</p> <p>For 2010, Omaha Mechanicla has a monthly overhead

Question

<p>The problem in full:</p>
<p>For 2010, Omaha Mechanicla has a monthly overhead cost forumula of 42900+$6 per direct labor hour. The firms' 2010 expected Annual capacity is $78000 direct labor hours, to be incurred evenly each month. Making one unit of the company's product requires 1.5 direct labor hours.</p>
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<p>A. Determine the total overhead to be applied per unit of product for 2010</p>
<p>B. Prepare journal entries to record the application of overhead to Work in Process Inventory and the incurrence of 128,550 of actual overhead in January 2010, when 6930 direct labor hours were worked</p>
<p>C. Given the acutal director labor hours in part (b), how many units would you have expected to be product in January?</p>
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<p>Where i am stuck: Getting started, not sure how to do the entire problem</p>
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<p>The book:</p>
<p><strong>Cost Accounting</strong></p>
<p><strong>Foundations and Evolutions 8 edition</strong></p>
<p><strong>Author: Kinney*Raiborn</strong></p>
<p><strong>&#160;</strong></p>
<p><strong>Can anyone help me out?</strong></p>

Explanation / Answer

ANnual Capacity is 78000 DL hrs..($ sign is a mistake...as can be seen from 6130 DL hrs in January) So monthly DL hrs = 78000/12 = 6500 DL hrs....(A) As per unit uses 1.5 DL hrs, annual prod = Annual DL hrs/1.5 = 78000/1.5 = 52000 units...(B) Monthly OH formula is $42900+$6 per DL Hrs So Monhly OH = $42900 +$6*6500 ....(from A) ie Monthly OH = $81,900 So Annual OH is $81,900*12 = $982,800 Annual Prod is 52000 units (from B) So OH pu = Annual OH/Annual Prod = $982,800/52000 = $18.90 pu......Ans A Hope this helps you in getting started....

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