1. What are the advantage of using the Normal costing approach to compute the total cost of the

product rather than to use Actual costing approach?

2. Compute the predetermined overhead rate under the current method.

3. Determine the unit product cost of EACH product for the current year under the simple costing system.

4. Compute the over- or under allocated manufacturing overhead for Peter Company.

Peter Company manufactures two products, Product A and Product B. Peter adopts a simple job costing system and uses normal costing system to compute the cost of each product. A single pre-determined plant-wide overhead rate is used based on direct labor hours as cost allocation base. The company estimated it would incur $500,000 in manufacturing overhead costs. The Actual manufacturing overhead is $520,000. The followings are some relevant information for Peter Company: Product A Product B Direct material cost per unit (Actual) $10 $20 Direct labor cost per unit (Actual) $15 $18 Actual Direct labor hours to produce 1 unit 5 hours 2 hours Budgeted number of units produced 12,000 units 20,000 units Total Budgeted direct labor hours 60,000 hours 40,000 hours Total Actual direct labor hours 55,000 hours 50,000 hours