All Work Must Be Shown It Can'T Be Just The Answers
All Work Must Be Shown It Can'T Be Just The Answers
Overhead.......Expected......Cost.............Expected
Item.............Cost.......Driver............Quantity
------------------------------------------------------
Setup costs....$960,000..Number of setups.......4,800
Ordering costs..160,000..Number of orders......20,000
Maintenance.....640,000..Machine hours.........64,000
Power............80,000..Kilowatt hours...... 200,000
The following are two of the jobs completed during the year.
Prime costs..............$25,000........$18,000
Units completed..............650............500
Direct labor hours...........180............220
Number of setups..............12.............15
Number of orders..............16.............30
Machine hours................360............300
Kilowatt hours...............180............650
Since 40,000 is the normal number of hours, we’re assuming that 40,000
hours yields $1,840,000, so it costs $46 per hour.
Required:
a. Determine the unit cost for each job using direct labor hours to
supply overhead. (That is overhead rate is based on direct labor
hours.)
Job 1:
Units = 650, hours = 180
180 * 46 = $8280
8280/650 (finding the cost per unit) = $12.74 per unit
Job 2:
Units = 500, hours = 220
220 * 46 = $10120
b. Determine the unit cost for each job using the four cost drivers.
(Round amounts to 2 decimal places.) (That is there are four
overhead rates: setups, orders, maintenance and power.)
Job 701:
unit cost here is the cost per unit, so first we must calculate the
total cost for the job...
Job 702:
Same thing...
The method used in step b because it is dealing with exact hours, not
average hours, and it is dealing with exact costs per each cost driver.
Just dealing with the tax savings. 34% tax bracket is irrelevant,
because we’re only dealing with the effect of selling.
$7,000 * 6 = $42,000