Foxx Company incurs $480,000 overhead costs each year in its three main departments, setup ($30,000), machining ($330,000), and packing ($120,000). ... If machining hours are used as a base under traditional casting, how much overhead is assigned to Product A1 each year? Select one: a. $96,000 b. $240,000 c. $165,000 d. $144,000.
Information about Fatima’s two products is as follows: Product A1 Product B1 Number of setups 20 20 Machining hours 1,000 4,000 Orders packed 150 350 Number of products manufactured 600 400 Instructions: 1. If machining hours are used as a base, how much overhead is assigned to Product A1 each year? show calculations 2.
Information about Foxx's two p follows: Product B1 20 4,000 350 400 Product A1 Number of setups Machining hours Orders packed Number of products manufactured 20 1,000 150 600 If machining hours are used as a base under traditional casting, how much overhead is assigned to Product A1 each year? A) $96,000 B) $240,000 C) $165,000 D) $144,000
If machining hours are used as a base under traditional costing, how much overhead is assigned to Product A1 each year? a. $96,000 Solution: $480,000 / 5,000 = $96; $96 x 1,000 = $96,000
How Do You Calculate Allocated Manufacturing Overhead? 1 Calculate the total manufacturing overhead costs. While some of these costs are fixed such as the rent of the factory, others may vary with an increase or decrease in production. 2 Select an allocation base. The allocation base is the basis on which a business assigns overhead costs to products. The commonly used allocation bases in manufacturing are direct machine hours and direct labor hours. 3 Divide the manufacturing overhead costs by the allocation base to calculate the amount of manufacturing overhead that should be assigned to each unit of production. 4 Determine the total of the allocation base generated in the current period by reviewing the maintenance and payroll records of the factory. The payroll records, for example, will show 2,000 direct labor hours during the current period. 5 Divide the allocation base value by the number of units produced. This provides the amount of manufacturing overhead attached to each unit of the allocation base.
Examples of manufacturing overhead costs are: Rent of the production building. Property taxes and insurance on manufacturing facilities and equipment. Communication systems and computers for a manufacturing facility.
that manufacturing overhead consists of all costs related to the production process other than direct materials and direct labor. Because manufacturing overhead costs are difficult to trace to specific jobs, the amount allocated to each job is based on an estimate.
Note that the manufacturing overhead account has a debit balance when overhead is underapplied because fewer costs were applied to jobs than were actually incurred. Overapplied overhead. Overhead costs applied to jobs that exceed actual overhead costs.
Normal costing tracks actual direct material costs and actual direct labor costs for each job and charges manufacturing overhead to jobs using a predetermined overhead rate. The predetermined overhead rate is calculated as follows:
Answer: Companies use normal costing for several reasons: 1 Actual overhead costs can fluctuate from month to month, causing high amounts of overhead to be charged to jobs during high-cost periods. For example, utility costs might be higher during cold winter months and hot summer months than in the fall and spring seasons. Maintenance costs might be higher during slow periods. Normal costing averages these costs out over the course of a year. 2 Actual overhead cost data are typically only available at the end of the month, quarter, or year. Managers prefer to know the cost of a job when it is completed—and in some cases during production—rather than waiting until the end of the period. 3 The price charged to customers is often negotiated based on cost. A predetermined overhead rate is helpful when estimating costs. 4 Bookkeeping is simplified by using a predetermined overhead rate. One rate is used to record overhead costs rather than tabulating actual overhead costs at the end of the reporting period and going back to assign the costs to jobs.