Question
Texas Co. is a small textile manufacturer using machine-hours to calculate the single indirect-cost rate to allocate manufacturing overhead costs to various jobs contracted during
Texas Co. is a small textile manufacturer using machine-hours to calculate the single indirect-cost rate to allocate manufacturing overhead costs to various jobs contracted during the year. The following estimates are provided for the coming year for the company to manufacture 1,000 jackets and for the 100 jackets to be custom made for Longhorn Golf Team. Company Longhorn Golf Team Direct materials $40,000 $2,000 Direct manufacturing labor $30,000 $3,000 Manufacturing overhead costs $80,000 Machine-hours (mh) 500 mh 100 mh Required: a. Determine the annual manufacturing overhead cost-allocation rate per machine hour for the company. b. Determine the amount of manufacturing overhead costs allocated to the Longhorn Golf Team job. c. Determine the estimated total manufacturing costs for the Longhorn Golf Team job. d. Determine the estimated manufacturing costs for a jacket to be used in Longhorn Golf Team. e. Determine the estimated manufacturing costs for Texas Co. to make a jacket. Explain why the average cost of a jacket to manufacture by the company is different from the custom made jacket for Longhorn Golf Team.
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