Questions: Lily Inc. has two types of handbags: standard and custom. The controller has decided to use a plantwide overhead rate based on direct labor costs. The president has heard of activity-based costing and wants to see how the results would differ if this system were used. Two activity cost pools were developed: machining (machine hours) and machine setup (number of setups). The total estimated machine hours is 2,400, and the total estimated number of setups is 500. Presented below is information related to the company's operations. - Standard Custom - Direct labor costs: 50,000 100,000 - Machine hours: 1,200 1,200 - Number of setups: 90 410 Total estimated overhead costs are 297,000. Overhead cost allocated to the machining activity cost pool is 192,000, and 105,000 is allocated to the machine setup activity cost pool. Compute the overhead rate using the traditional (plantwide) approach information related to each product's use of cost drivers. (Round answer to 0 decimal places, e.g. 12.) Predetermined overhead rate % of direct labor cost

Lily Inc. has two types of handbags: standard and custom. The controller has decided to use a plantwide overhead rate based on direct labor costs. The president has heard of activity-based costing and wants to see how the results would differ if this system were used. Two activity cost pools were developed: machining (machine hours) and machine setup (number of setups). The total estimated machine hours is 2,400, and the total estimated number of setups is 500. Presented below is information related to the company's operations. - Standard Custom - Direct labor costs: 50,000 100,000 - Machine hours: 1,200 1,200 - Number of setups: 90 410 Total estimated overhead costs are 297,000. Overhead cost allocated to the machining activity cost pool is 192,000, and 105,000 is allocated to the machine setup activity cost pool. Compute the overhead rate using the traditional (plantwide) approach information related to each product's use of cost drivers. (Round answer to 0 decimal places, e.g. 12.) Predetermined overhead rate % of direct labor cost
Transcript text: Lily Inc. has two types of handbags: standard and custom. The controller has decided to use a plantwide overhead rate based on direct labor costs. The president has heard of activity-based costing and wants to see how the results would differ if this system were used. Two activity cost pools were developed: machining (machine hours) and machine setup (number of setups). The total estimated machine hours is 2,400 , and the total estimated number of setups is 500 . Presented below is information related to the company's operations. \begin{tabular}{lrrr} \hline & Standard & & \multicolumn{1}{c}{ Custom } \\ \hline Direct labor costs & $\$ 50,000$ & & $\$ 100,000$ \\ \hline Machine hours & 1,200 & & 1,200 \\ \hline Number of setups & 90 & 410 \\ \hline \end{tabular} Total estimated overhead costs are $\$ 297,000$. Overhead cost allocated to the machining activity cost pool is $\$ 192,000$, and $\$ 105,000$ is allocated to the machine setup activity cost pool. (a) Compute the overhead rate using the traditional (plantwide) approach information related to each product's use of cost drivers. (Round answer to $O$ decimal places, e.g. 12.) Predetermined overhead rate \% of direct labor cost
failed

Solution

failed
failed

To compute the overhead rate using the traditional (plantwide) approach, we need to follow these steps:

  1. Determine the total direct labor costs:

    • Standard handbags: \$50,000
    • Custom handbags: \$100,000
    • Total direct labor costs = \$50,000 + \$100,000 = \$150,000

  2. Calculate the predetermined overhead rate:

    • Total estimated overhead costs = \$297,000
    • Predetermined overhead rate = (Total estimated overhead costs / Total direct labor costs) * 100
    • Predetermined overhead rate = (\$297,000 / \$150,000) * 100

  3. Perform the calculation:

    • Predetermined overhead rate = 1.98 * 100
    • Predetermined overhead rate = 198%

So, the predetermined overhead rate using the traditional (plantwide) approach is 198% of direct labor cost.

Summary: The predetermined overhead rate using the traditional (plantwide) approach is 198% of direct labor cost.

Was this solution helpful?
failed
Unhelpful
failed
Helpful

Questions asked by other users

failedAnswered
Laura took out a 9000 loan for 7 months and was charged simple interest. The total interest she paid on the loan was 336. As a percentage, what was the annual interest rate of Laura's loan? Do not round any intermediate computations. If necessary, refer to the list of financial formulas.
failedAnswered
Interactive Map 2.2 Hare Lynx A different species of hare, the jackrabbit, lives in the southwestern desert. Like other herbivores in its ecosystem (antelope, mice, and ground squirrels), the jackrabbit eats a variety of plant foods including grasses and wildflowers in the spring and summer, and the leaves of shrubs and trees in the winter. The shrubs and trees also provide hiding places from their predators. Predators include hawks, owls, coyotes, foxes, and other mid-sized carnivores. The jackrabbits are also bothered by ticks, fleas, and lice. Which factor might represent top-down regulation for the jackrabbit population? - grasses and wildflowers - shrubs and trees - rainfall needed for plant growth - hawks and owls
failedAnswered
You need to give a Bulldog 65 mg of the antihistamine Benadryl, what volume would you give to your patient if the concentration is 50 mg / mL. 1.3 mL 0.77 mL 6.5 mL 5 mL
failedAnswered
You are working on a math course that has 100 lessons and have already completed 31 of them. You are able to complete one lesson per day. How many days will it take you to complete the course? N=1 d+31 d=[?]
failedAnswered
If (f(x)=x^2-2 x-3, x neq 2; k-3, x=2) find (k) such that (lim x rightarrow 2 f(x)=f(2))