Exercise 12-3 Allocating overhead cost to accomplish smoothing LO 12-2 Kenneth C

Question

Exercise 12-3 Allocating overhead cost to accomplish smoothing LO 12-2 Kenneth Corporation expects to incur indirect overhead costs of $111,150 per month and direct manufacturing costs of $13 per unit. The expected production activity for the first four months of 2013 is as follows. Estimated production in units 4,800 8,800 4,700 6,400 Required a. Calculate a predetermined overhead rate based on the number of units of product expected to be made during the first four months of the year per unit b. Allocate overhead costs to each month using the overhead rate computed in Requirement a Month Allocated Cost January February March April Total Type here to search

Explanation / Answer

ans 1 predetermined overhead rate 18 (111150*4)/(4800+8800+4700+6400) ans 2 Month Total Jan (18*4800) 86400 Feb (18*8800) 158400 Mar (18*4700) 84600 April (18*6400) 115200 Total 444600 ans c Jan Feb Mar Apr No. of units C 4800 8800 4700 6400 Expected cost Overhead 86400 158400 84600 115200 Direct Cost ($13*no of units) 62400 114400 61100 83200 Total cost T 148800 272800 145700 198400 Cost per unit T/C 31.0 31.0 31.0 31.0

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