Question

Exercise 15-17 Overhead rate calculation, allocation, and analysis LO P3 Moonrise Bakery applies factory overhead based on direct labor costs. The company incurred the following costs during 2017: direct materials costs, $760,000; direct labor costs, $4,100,000; and factory overhead costs applied, $2,460,000. 1. Determine the company’s predetermined overhead rate for 2017. 2. Assuming that the company’s $82,000 ending Work in Process Inventory account for 2017 had $31,000 of direct labor costs, determine the inventory’s direct materials costs. 3. Assuming that the company’s $600,000 ending Finished Goods Inventory account for 2017 had $338,000 of direct materials costs, determine the inventory’s direct labor costs and its overhead costs.

Answer 1

Answer:

Requirement 1 - Predetermined Overhead Rate is $0.60 per direct labor cost

Explanation:

Requirement 1 - Predetermined Overhead Rate

Predetermined Overhead Rate = Budgeted Overheads / Budgeted Activity

In our senario we use the formular:

Factory overheads Applied = Predetermined Overhead Rate × Actual Activity

therefore, Predetermined Overhead Rate = Factory overheads Applied / Actual Activity

Note : Moonrise Bakery applies factory overhead based on direct labor costs

Predetermined Overhead Rate  = $2,460,000/$4,100,000

                                                      = $0.60 per direct labor cost