Ridgeland Inc. makes backpacks for large sporting goods chains that are sold und

Question

Ridgeland Inc. makes backpacks for large sporting goods chains that are sold under the customers' store brand names. The Accounting Department has identified the following overhead costs and cost drivers for next year:

Setup Cost

Total predicted direct labor hours for next year is 42,500. The following data are for two recently completed jobs:

a. Determine the unit cost for each job using a traditional plantwide overhead rate based on direct labor hours.
Round cost per unit answers to two decimal places when applicable.

Overhead Item Expected Cost Cost Driver Maximum Quantity

Setup Cost

489,600 Number of Setups 7,200 Ordering Cost 130,000 Number of Orders 65,000 Maintenance 920,000 Number of Machine Hours 80,000 Power 88,000 Number of Kilowatt Hours 440,000

Explanation / Answer

Answer:-a)-Overhead rate based on direct labor hours= Total estimated overhead/Total predicated direct labor hours

=$1627600/42500 direct labor hours

=$38.30 per direct labor hours

Where:-

Total estimated overhead cost =Setup cost + Ordering cost + Maintenance + Power

=$489600 + $130000 +$920000 +$88000

=$1627600

Ridgeland Inc. Calculation of unit cost for each job using a traditional plantwide overhead rate Particluars Job 201 Job 202 $ $ Cost of Direct materials 10500 12000 Cost of Direct labor 18600 62300 Overhead costs 220 Direct Labor Hours*$38.30 per Direct Labor Hour=8426 270 Direct Labor Hours*$38.30 per Direct Labor Hour=10341 Total costs (a) 37526 84641 Number of units (b) 900 750 Total cost per unit (c=a/b) 41.70 112.85

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