Somerset Computer Company has been purchasing carrying cases for its portable computers at a purchase price of $24 per unit. The
company, which is currently operating below full capacity, charges factory overhead to production at the rate of 40% of direct labor cost. The unit costs to produce comparable carrying cases are expected to be as follows: Direct materials $8.00 Direct labor 12.00 Factory overhead (40% of direct labor) 4.80
Total cost per unit $24.80
If Somerset Computer Company manufactures the carrying cases, fixed factory overhead costs will not increase and variable factory overhead costs associated with the cases are expected to be 25% of the direct labor costs.
Prepare a differential analysis dated April 30 to determine whether the company should make (Alternative 1) or buy (Alternative 2) the carrying case. If an amount is zero, enter "0". If required, round your answers to two decimal places.
Total cost per unit $24.80
If Somerset Computer Company manufactures the carrying cases, fixed factory overhead costs will not increase and variable factory overhead costs associated with the cases are expected to be 25% of the direct labor costs.
Prepare a differential analysis dated April 30 to determine whether the company should make (Alternative 1) or buy (Alternative 2) the carrying case. If an amount is zero, enter "0". If required, round your answers to two decimal places.
1 answer:
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Answer:
option (C) 32,750 hours
Explanation:
Data provided in the question:
Actual manufacturing overhead cost = $250,000
Overapplied overhead = $12,000
Predetermined overhead rate = $8.00 per direct labor-hour
Now,
The total Manufacturing Overhead applied last year
= Actual manufacturing overhead cost + Overapplied overhead
= $250,000 + $12,000
= $262,000
Therefore,
Direct Labor Hours worked last year =
or
=
= 32,750 hours
Hence,
The correct answer is option (C) 32,750 hours