Answer:
Instructions are below.
Explanation:
a)
<u>First, we need to calculate the predetermined overhead rate:</u>
Predetermined manufacturing overhead rate= total estimated overhead costs for the period/ total amount of allocation base
Predetermined manufacturing overhead rate= 180,660/2,600
Predetermined manufacturing overhead rate= $69.49 per machine hour
<u>Now, we can allocate overhead to each product line:</u>
Allocated MOH= Estimated manufacturing overhead rate* Actual amount of allocation base
Home= 69.49*1,200= $83,388
Work= 69.49*1,400= $97,286
<u>b) We need to determine the unitary cost for each product:</u>
Home:
Unitary cost= 38 + 23 + (83,388/620)= $195.50
Work:
Unitary cost= 72 + 40 + (97,286/490)= $310.54
<u>c) Gross margin= selling price - unitary cost</u>
Home:
Gross margin= 359 - 195.5= $163.4
Work:
Gross margin= 573 - 310.54= $262.46
