Question

Rasmussen Corporation expects to incur indirect overhead costs of $80,000 per month and direct manufacturing costs of $12 per unit. The expected production activity for the first four months of 2017 is as follows:
Required
a. Calculate a predetermined overhead rate based on the number of units of product expected to be made during the first four months of the year.
b. Allocate overhead costs to each month using the overhead rate computed in Requirement a.
c. Calculate the total cost per unit for each month using the overhead allocated in Requirement b.
Month Jan Feb March April
Number of Units 6,000 7,000 3,000 4,000
Expected Cost
Overhead ? ? ? ?
Direct Cost ? ? ? ?
Total Cost
Cost per unit ? ? ? ?

Answer 1

Answer:

Results are below.

Explanation:

First, we need to calculate the predetermined overhead rate for the period:

Predetermined manufacturing overhead rate= total estimated overhead costs for the period/ total amount of allocation base

Predetermined manufacturing overhead rate= (80,000*4) / 20,000

Predetermined manufacturing overhead rate= $16 per unit

Now, we can allocate overhead to each month:

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

January= 6,000*16= $96,000

February= 7,000*16= $112,000

March= 3,000*16= $48,000

April= 4,000*16= $64,000

The total unitary manufacturing costs are constant:

Total unitary manufacturing cost= 12 + 16

Total unitary manufacturing cost= $28