Question
Trex by Rex produces back packs and fanny packs for the outdoors enthusiast. Production costs include direct materials, direct labor, and manufacturing overhead both fixed
Trex by Rex produces back packs and fanny packs for the outdoors enthusiast. Production costs include direct materials, direct labor, and manufacturing overhead both fixed and variable. The following costs were budgeted for the year:
Fixed manufacturing overhead | $187,200 |
Variable manufacturing overhead | $1.10/direct labor hour |
Fixed selling and administration | $375,000 |
The back packs are expected to require 2.5 direct labor hours and planned production is 12,000 units. The fanny packs are expected to require 1.8 direct labor hours and planned production is 18,000 units.
The actual direct labor hours required in production for the year were as follows:
Product | Direct Labor Hours Used |
Back packs | 34,060 DL hours |
Fanny Packs | 16,250 DL hours |
Overhead is applied to production using direct labor hours and the actual manufacturing cost for the year was $270,500.
Calculate the manufacturing overhead rate used to apply overhead to production of both the back packs and the fanny packs. What is the resulting over- or under-absorbed overhead for the year?
Explain what the over- or under-absorbed overhead represents and how it will be handled in the determination of the final costs of the products.
Show your work for any calculations and written analysis.
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started