Questions: Fremont Cookies has been baking coconut cookies for 27 years. Fremont makes two types of cookies, regular and premium. Cookies are sold in batches to other commercial businesses and premium cookies are made-to-order in batches based on customer orders/jobs. On January 1, 2025, the company's inventory balances were as follows: Raw Materials Inventory: 35,000 Work-in-Process Inventory: 24,900 Finished Goods Inventory: 6,700 The company applies overhead cost to jobs on the basis of direct labor-hours. For the current year, 2025, the company's predetermined overhead rate per direct labor-hour was based on a cost formula that estimated 505,000 of total manufacturing overhead for an estimated activity level of 10,005 machine hours. Total Estimated overhead costs: 505,000 Total estimated direct labor hours: 10,005 Predetermined overhead allocation rate: 50.47

To address the question, we need to understand the context and requirements related to Fremont Cookies' inventory and overhead cost application. Here's a breakdown of the information provided and the relevant calculations:

1. Inventory Balances on January 1, 2025:

   • Raw Materials Inventory: $35,000
   • Work-in-Process Inventory: $24,900
   • Finished Goods Inventory: $6,700

2. Overhead Cost Application:

   • The company applies overhead costs to jobs based on direct labor-hours.
   • The predetermined overhead rate is calculated using the estimated total manufacturing overhead and the estimated activity level in direct labor-hours.

3. Calculation of Predetermined Overhead Rate:

   • Total Estimated Overhead Costs: $505,000
   • Total Estimated Direct Labor Hours: 10,005

   The predetermined overhead rate is calculated as follows: \[ \text{Predetermined Overhead Rate} = \frac{\text{Total Estimated Overhead Costs}}{\text{Total Estimated Direct Labor Hours}} = \frac{505,000}{10,005} \approx 50.47 \]

   This means that for every direct labor-hour worked, $50.47 of overhead costs will be applied to the job.

Summary:

• Fremont Cookies has specific inventory balances at the start of 2025.
• The company uses a predetermined overhead rate of $50.47 per direct labor-hour to allocate overhead costs to jobs.
• This rate is based on estimated overhead costs of $505,000 and an estimated 10,005 direct labor-hours for the year.

This information is crucial for understanding how Fremont Cookies manages its cost accounting and inventory for the year 2025.