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The Silver Company manufacturers two products, the Scrambler and Organizer. Direct labor, Direct material, and total...

The Silver Company manufacturers two products, the Scrambler and Organizer. Direct labor, Direct material, and total overhead costs are given. The company uses predetermined overhead rates (POHR) to allocate overhead. Certain overhead items are associated with Machine Hours and other items are associated with Direct Labor Cost. This is shown in the overhead categories below.

   Scrambler                          Organizer                                                    

Units produced 400 900                                            

Direct labor cost                       $150,000                            $230,000

Direct material Cost                 $ 80,000                            $225,000                

Direct labor hours 6,000 9,000

Machine hours                              4,000 11,000

                       Overhead Categories

                       Utilities                                 $35,000                                    Machine hours

                       Shop supplies                        15,000                                    Machine hours

                       Supervision                            50,000                                   Direct labor cost

                       Equipment maintenance 40,000                                    Machine hours

                       Training 8,000                                   Direct labor cost

                       Indirect labor                        18,000      Direct labor cost   

                       Total Overhead                $166,000                  

Required  

a.     Calculate the predetermined overhead rates for Machine hours and Direct labor cost.

b.     Calculate the total cost per unit for each of the two products.

Business   Accounting   
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Homework Answers

Answer #1

a) Predetermine overhead rate :

Overhead Estimated overhead Estimated activity Overhead rate
Based on Machine hour 35000+15000+40000 = 90000 15000 Hour 6 per MH
Based on direct labor cost 50000+18000+8000 = 76000 380000 20% of labor cost

b) Total cost per unit

Scrambler Organizer
Direct labor 150000 230000
Direct material 80000 225000
Overhead based on MH 24000 66000
Overhead based on Direct labor cost 30000 46000
Total Cost 284000 567000
Unit 400 900
Unit cost 710 630
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