Question

Chan Company identified the following activities, costs, and activity drivers for 2017. The company manufactures two types of go-karts: fast and standard. Activity Expected Costs Expected Activity Handling materials $ 690,000 230,000 parts Inspecting product 736,000 1,280 batches Processing purchase orders 170,000 1,360 orders Paying suppliers 240,000 640 invoices Insuring the factory 430,000 53,750 square feet Designing packaging 88,000 2 models
1. Compute a single plantwide overhead rate assuming that the company assigns overhead based on 110,000 budgeted direct labor hours.
2. In January 2017 the fast model required 3,500 direct labor hours and the standard model required 7,000 direct labor hours. Assign overhead costs to each model using the single plantwide overhead rate.

Answer 1

Answer:

Instructions are listed below.

Explanation:

Giving the following information:

The company manufactures two types of go-karts: fast and standard.

Activity Expected / Costs Expected:

Handling materials $ 690,000 230,000 parts

Inspecting product 736,000 1,280 batches

Processing purchase orders 170,000 1,360 orders

Paying suppliers 240,000 640 invoices

Ensuring the factory 430,000 53,750 square feet

Designing packaging 88,000 2 models

1) Estimated manufacturing overhead rate= total estimated overhead costs for the period/ total amount of allocation base

Total estimated overhead= 690,000 + 736,000 + 170,000 + 240,000 + 430,000 + 88,000= 2,354,000

Estimated manufacturing overhead rate= 2,354,000/110,000= $21.4 per direct labor hour.

2) Allocated MOH= Estimated manufacturing overhead rate* Actual amount of allocation base

Fast= 21.4*3,500= $74,900

Standard= 21.4*7,000= $149,800