Catalytic Chemical Corporation has a significant level of manufacturing overhead. After preparing their budget for the next year, management expects the following overhead costs (the cost driver for each overhead cost pool is also shown):ActivityTotal CostCost DriverMaintenance$20,000Machine hoursMaterials receiving80,000Shipments receivedMachine setups50,000# of setupsInspection30,000# of inspectionsThe expected activity for the year for various cost drivers is:Direct Labor Hours40,000Machine Hours20,000Shipments Received4,000Setups200Quality Inspections8,000The company is considering accepting a significant production contract. Estimates for the contract are as follows:Direct materials$100,000Direct labor (7,500 hours)$150,000Number of material shipments received290Number of inspections50Number of setups35Number of machine houre3,000NOTE: Round all per-unit costs to nearest cent.What amount of overhead would be allocated to the contract if a company-wide rate based on direct labor hours were used?

Overhead costs, sometimes called overhead or operating expenses, are the expenses incurred by a business that are unrelated to the creation or production of a good or service. No matter how profitable a firm is, it must cover these expenses in order to continue operating.Maintenance 20,000 Materials receiving 80,000 Machine Setups 50,000 Inspection 30,000 Total Overhead 180,000 Predetermined Overhead Rate = $180,000 (total overhead) / 40,000 Lab Hrs. Predetermined Overhead Rate = $4.50 per Labor hour Overhead Allocated to the Contract = 7,500 Lab. Hrs. x $4.50 Overhead Allocated to the Contract = $33,750

Answered: Catalytic Chemical Corporation has a…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Related questions

Concept explainers

Question

Catalytic Chemical Corporation has a significant level of manufacturing overhead. After preparing their budget for the next year, management expects the following overhead costs (the cost driver for each overhead cost pool is also shown):

Activity	Total Cost	Cost Driver
Maintenance	$20,000	Machine hours
Materials receiving	80,000	Shipments received
Machine setups	50,000	# of setups
Inspection	30,000	# of inspections

The expected activity for the year for various cost drivers is:

Direct Labor Hours	40,000
Machine Hours	20,000
Shipments Received	4,000
Setups	200
Quality Inspections	8,000

The company is considering accepting a significant production contract. Estimates for the contract are as follows:

Direct materials	$100,000
Direct labor (7,500 hours)	$150,000
Number of material shipments received	290
Number of inspections	50
Number of setups	35
Number of machine houre	3,000

NOTE: Round all per-unit costs to nearest cent.

What amount of overhead would be allocated to the contract if a company-wide rate based on direct labor hours were used?

Expert Solution

Trending now

This is a popular solution!

Step by step

Solved in 2 steps

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.

Similar questions