Eric Williams is a cost accountant and business analyst for Diamond Design Company (DDC), which manufactures expensive brass doorknobs. DDC uses two direct-cost categories: direct materials and direct manufacturing labor. Williams feels that manufacturing overhead is most closely related to material usage. Therefore, DDC allocates manufacturing overhead to production based upon pounds of materials used. At the beginning of 2017, DDC budgeted annual production of 420,000 doorknobs and adopted the fol- lowing standards for each doorknob: Input 0.3 lb. @ $10/lb. 1.2 hours @$17/hour Cost/Doorknob Direct materials (brass) $ 3.00 Direct manufacturing labor Manufacturing overhead: 20.40 $5/lb. x 0.3 lb. $15/lb. x 0.3 Ib. Variable 1.50 Fixed 4.50 Standard cost per doorknob $29.40 Actual results for April 2017 were as follows: Production Direct materials purchased Direct materials used Direct manufacturing labor Variable manufacturing overhead Fixed manufacturing overhead 29,000 doorknobs 12,400 lb. at $11/lb. 8,500 lbs. 29,200 hours for $671,600 $ 65,100 $158,000

Eric Williams is a cost accountant and business analyst for Diamond Design Company (DDC), which manufactures expensive brass doorknobs. DDC uses two direct-cost categories: direct materials and direct manufacturing labor. Williams feels that manufacturing overhead is most closely related to material usage. Therefore, DDC allocates manufacturing overhead to production based upon pounds of materials used. At the beginning of 2017, DDC budgeted annual production of 420,000 doorknobs and adopted the fol- lowing standards for each doorknob: Input 0.3 lb. @ $10/lb. 1.2 hours @$17/hour Cost/Doorknob Direct materials (brass) $ 3.00 Direct manufacturing labor Manufacturing overhead: 20.40 $5/lb. x 0.3 lb. $15/lb. x 0.3 Ib. Variable 1.50 Fixed 4.50 Standard cost per doorknob $29.40 Actual results for April 2017 were as follows: Production Direct materials purchased Direct materials used Direct manufacturing labor Variable manufacturing overhead Fixed manufacturing overhead 29,000 doorknobs 12,400 lb. at $11/lb. 8,500 lbs. 29,200 hours for $671,600 $ 65,100 $158,000

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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Primara Corporation has a standard costing system in which it applies overhead to products on the basis of the standard direct labour- hours allowed for the actual output of the period. Data concerning the most recent year appear below: Total budgeted fixed overhead cost for the year Actual fixed overhead cost for the year Budgeted standard direct labour-hours (denominator level of activity) Actual direct labour-hours Standard direct labour-hours allowed for the actual output $ 500,000 $ 508,000 50,000 54,000 52,000 Required: 1. Compute the fixed portion of the predetermined overhead rate for the year. Predetermined overhead rate per DLH
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