LO 6.1Steeler Towel Company estimates its overhead to be $250,000. It expects to have 100,000 direct labor hours costing $2,500,000 in labor and utilizing 12,500 machine hours. Calculate the predetermined overhead rate using: A. Direct labor hours B. Direct labor dollars C. Machine hours FA2
Process Costing
Process costing is a sort of operation costing which is employed to determine the value of a product at each process or stage of producing process, applicable where goods produced from a series of continuous operations or procedure.
Job Costing
Job costing is adhesive costs of each and every job involved in the production processes. It is an accounting measure. It is a method which determines the cost of specific jobs, which are performed according to the consumer’s specifications. Job costing is possible only in businesses where the production is done as per the customer’s requirement. For example, some customers order to manufacture furniture as per their needs.
ABC Costing
Cost Accounting is a form of managerial accounting that helps the company in assessing the total variable cost so as to compute the cost of production. Cost accounting is generally used by the management so as to ensure better decision-making. In comparison to financial accounting, cost accounting has to follow a set standard ad can be used flexibly by the management as per their needs. The types of Cost Accounting include – Lean Accounting, Standard Costing, Marginal Costing and Activity Based Costing.
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### ACC200 Principles of Accounting III
#### Assignment 4
**EA1.**
**LO 6.1** Steeler Towel Company estimates its overhead to be $250,000. It expects to have 100,000 direct labor hours costing $2,500,000 in labor and utilizing 12,500 machine hours. Calculate the predetermined overhead rate using:
A. Direct labor hours
B. Direct labor dollars
C. Machine hours
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**Detailed Explanation for EA1:**
To calculate the predetermined overhead rate, you can use one of three bases: Direct labor hours, Direct labor dollars, or Machine hours. The predetermined overhead rate is calculated as:
\[
\text{Predetermined Overhead Rate} = \frac{\text{Estimated Overhead}}{\text{Base}}
\]
- **Direct Labor Hours**: If using direct labor hours, the base is the total number of direct labor hours.
\[
\text{Predetermined Overhead Rate} = \frac{250,000}{100,000} = 2.50 \text{ per direct labor hour}
\]
- **Direct Labor Dollars**: If using direct labor dollars, the base is the total cost of direct labor.
\[
\text{Predetermined Overhead Rate} = \frac{250,000}{2,500,000} = 0.10 \text{ per dollar of direct labor}
\]
- **Machine Hours**: If using machine hours, the base is the total number of machine hours.
\[
\text{Predetermined Overhead Rate} = \frac{250,000}{12,500} = 20.00 \text{ per machine hour}
\]
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**EA2**
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