Question 1

LOVATO CORPORATION produces a product for which it sells for $70. The following standard cost record is available: Direct materials 3 lbs. @ $5/lb. Direct labor 4 hrs. @ $15/hr. Overhead Information: Production information: Budgeted $500,000 Budgeted direct-labor hours 100,000 hrs. Actual 480,000 Actual direct-labor hours 120,000 hrs. 5. Compute the predetermined overhead rate per hr. $______________ 6. How much overhead is applied to each unit? $____________ per unit

Question 2

Castellano Corporation produces three products: Alpha, Beta and Delta. The following unit information is available: Alpha Beta Delta Selling price $ 60 $ 90 $ 80 Variable costs: Direct materials 27 14 40 Direct labor 12 32 16 Variable overhead 8 3 4 Total variable costs 42 54 60 Contribution margin $ 18 $ 36 $ 20 Contribution margin ratio 30% 40% 25% Hour required per unit 1.5 4 2 The direct labor rate is averages $8 per hour. Based on current staffing, a maximum of 3,000 direct labor hours are available each month. A suspicious fire has burned down the factor of their biggest competitor. As a result, they are experiencing large demand which is WAY bigger than their current capacity. They need to know which product to focus on next month. 1. Which orders would you recommend that the company work on next month - orders for Alpha, Beta or Delta? Show all computations. _______________ Alpha, Beta or Delta 2. NOW ASSUME that the current market demand for Alpha is 1,000 units. In this case, how many BETA should they manufacture? _________ units