Question
Company manufactures wheel rims. The controller expects the following ABC allocation rates for 2018: Eason produces two wheel rim models: standard and deluxe. Expected data
Company manufactures wheel rims. The controller expects the following ABC allocation rates for 2018:
Eason produces two wheel rim models: standard and deluxe. Expected data for 2018 are as follows
The company expects to produce 500 units of each model during the year. Read the requirements
Requirement 1. Compute the total estimated indirect manufacturing cost for 2018.
Begin by selecting the formula to compute the total estimated overhead (OH) costs.
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| Total estimated | |
| Predetermined overhead allocation rate | x | Total estimated qty of the allocation base | = | overhead costs | ||
Now compute the total estimated indirect manufacturing cost for 2018.
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| Total Estimated | |
| Activity |
| Indirect Manufacturing Cost | |
| Materials handling | $22,000 | ||
| Machine setup | 14,400 | ||
| Insertion of parts | 143,000 | ||
| Finishing | 292,500 | ||
| Total estimated indirect manufacturing cost | $471,900 | ||
Requirement 2. Prior to 2018, Eason used a single plantwide overhead allocation rate system with direct labor hours as the allocation base. Compute the predetermined overhead allocation rate based on direct labor hours for 2018.
Use this rate to determine the estimated indirect manufacturing cost per wheel rim for each model, to the nearest cent.
First, select the formula, and then enter the amounts to compute the allocation rate.
| ? | / |
| = | Allocation rate | |||||
| ? | / | 5,500 | = | ? | |||||
Requirement 3 - compute the estimated ABC indirect manufacturing cost per unit of each model for 2018. Carry each cost to the nearest cent.
Predetermined Overhead Activity Allocation Base Allocation Rate Materials handling Number of parts 4.00 per part Number of setups 400.00 per setup Machine setup Insertion of parts Number of parts 26.00 per part Number of finishing hours 90.00 per hour Finishing Standard Deluxe 4.0 7.0 Parts per rim Setups per 500 rims 18.0 18.0 Finishing hours per rim 1.0 5.5 Total direct labor hours per rim 5.0 6.0 LO 1. Compute the total estimated indirect manufacturing cost for 2018 2. Prior to 2018, Eason used a single plantwide overhead allocation rate system with direct labor hours as the allocation base. Compute the predetermined overhead allocation rate based on direct labor hours for 2018. Use this rate to determine the estimated indirect manufacturing cost per wheel rim for each model, to the nearest cent. 3. Compute the estimated ABC indirect manufacturing cost per unit of each model for 2018. Carry each cost to the nearest cent
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