CORNERSTONE EXERCISES Cornerstone Exercise 4.1 Applied Overhead and Unit Overhead Cost: Plantwide Rates Seco, Inc., produces two types of clothes dryers: deluxe and regular. Seco uses a plantwide rate based on direct labor hours to assign its overhead costs. The company has the following esti- mated and actual data for the coming year: Estimated overhead $2,000,000 50,000 Expected activity. Actual activity (direct labor hours): Deluxe dryer Regular dryer Units produced: Deluxe dryer Regular dryer 10,000 40,000 20,000 200,000 Required: 1. Calculate the predetermined plantwide overhead rate and the applied overhead for each product, using direct labor hours. 2. Calculate the overhead cost per unit for each product. 3. What if the deluxe product used 20,000 hours (to produce 20,000 units) instead of 10,000 hours (total expected hours remain the same)? Calculate the effect on the profitability of this product line if all 20,000 units are sold, and then discuss the implications of this outcome.

CORNERSTONE EXERCISES Cornerstone Exercise 4.1 Applied Overhead and Unit Overhead Cost: Plantwide Rates Seco, Inc., produces two types of clothes dryers: deluxe and regular. Seco uses a plantwide rate based on direct labor hours to assign its overhead costs. The company has the following esti- mated and actual data for the coming year: Estimated overhead $2,000,000 50,000 Expected activity. Actual activity (direct labor hours): Deluxe dryer Regular dryer Units produced: Deluxe dryer Regular dryer 10,000 40,000 20,000 200,000 Required: 1. Calculate the predetermined plantwide overhead rate and the applied overhead for each product, using direct labor hours. 2. Calculate the overhead cost per unit for each product. 3. What if the deluxe product used 20,000 hours (to produce 20,000 units) instead of 10,000 hours (total expected hours remain the same)? Calculate the effect on the profitability of this product line if all 20,000 units are sold, and then discuss the implications of this outcome.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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