Question

Exercise 11-12 (Part Level Submission) (Video) Byrd Company produces one product, a putter called GO-Putter. Byrd uses a standard cost system and determines that it should take one hour of direct labor to produce one GO-Putter. The normal production capacity for this putter is 125,000 units per year. The total budgeted overhead at normal capacity is $1,062,500 comprised of $437,500 of variable costs and $625,000 of fixed costs. Byrd applies overhead on the basis of direct labor hours. During the current year, Byrd produced 73,100 putters, worked 86,700 direct labor hours, and incurred variable overhead costs of $186,405 and fixed overhead costs of $562,350. Collapse question part (a) Compute the predetermined variable overhead rate and the predetermined fixed overhead rate. (Round answers to 2 decimal places, e.g. 2.75.)

Answer 1

(a) Compute the predetermined variable overhead rate and the predetermined fixed overhead rate.

Standard DL hours at normal capacity:

=Hours required per unit x normal production capacit

=1 x125,000

= 125,000

Predetermined variable overhead rate

=Variable overhead cost/ Total DL hours required

= 437,500 /125000

=3.5

Predetermined variable overhead rate =$3.5 per DL

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Predetermined fixed overhead rate.

= Fixed overhead cost/ Total DL hours required

= 625,000 /125000

=5

Predetermined Fixed overhead rate =$5 per DL