Question

1.If the labour cost is 20,000, rent is 30,000, machine hours is 4,000 hours and labour hours is 2,000 hours. What is the overhead rate as per the ABC method?

2.Name one difference between ABC Costing and Single Plantoverhead rate method

3.The labour cost is 30,000, material cost is 40,000 and overheads is 60,000. The total labour hours is 1,000 and machine hours is 2,000. What is the single plantwide overhead rate? Show your work.

Your answer

Answer 1

1. in the absence of exact cost driver for the rent assuming it as machine hours

overhead rate = cost pool / cost driver

overhead rate for the rent =rent expense / machine hours = 30000/4000 = 7.5 per machine hours

labour cost is not overhead

2.ABC method calculate overhead rate by dividing appropriate cost driver that causing the expense then allocate the expense based on the each product or service which benefited from the cost driver

under single plantwide method overhead rate is calculated by total unit produced or labour hour used to produce the service

3. single plantwide overhead rate = overhead / labour hours = 60000 / 1000 = 60 per labour hours

overhead rate = 60