Ryan Corporation manufactures auto steering systems. Prime cost and machine time estimates for one unit of the product for the year follow: Direct materials Direct labor ($29/hour) $ 370 $ 725 20 Machine hours This product requires 15 hours of direct labor in Department A and 10 hours in Department B. Also, it requires 5 machine hours in Department A and 15 machine hours in Department B. Using output as the activity, the factory overhead costs estimated in these two departments follow:
Ryan Corporation manufactures auto steering systems. Prime cost and machine time estimates for one unit of the product for the year follow: Direct materials Direct labor ($29/hour) $ 370 $ 725 20 Machine hours This product requires 15 hours of direct labor in Department A and 10 hours in Department B. Also, it requires 5 machine hours in Department A and 15 machine hours in Department B. Using output as the activity, the factory overhead costs estimated in these two departments follow:
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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Transcribed Image Text:Ryan Corporation manufactures auto steering systems. Prime cost and machine time estimates for one unit of the product for the year
follow:
Direct materials
Direct labor ($29/hour)
Machine hours
$ 370
$ 725
20
This product requires 15 hours of direct labor in Department A and 10 hours in Department B. Also, it requires 5 machine hours in
Department A and 15 machine hours in Department B. Using output as the activity, the factory overhead costs estimated in these two
departments follow:
Variable cost
Fixed cost
A
$ 405,000
111,000
B
$250,000
180,000
Management expects the firm to produce 1,000 units during the year.
Required:
1. Assume the total actual overhead base used was equal to the estimated base for the 1,000 units produced. Assume that factory
overhead was applied on the basis of direct labor hours. Compute the predetermined plantwide factory overhead rate.
2. If factory overhead were applied on the basis of machine hours, what would be the plantwide overhead rate?
3. If the company produced 1,000 units during the year, what was the total amount of applied factory overhead in each department in
requirements 1 and 2?
5. Compute the departmental overhead rate and amount of applied overhead for Department A using direct labor hours as the
allocation base and for Department B using machine hours as the allocation base.
Complete this question by entering your answers in the tabs below.
Required 1 Required 2 Required 3
Required 5
Assume the total actual overhead base used was equal to the estimated base for the 1,000 units produced. Assume that
factory overhead was applied on the basis of direct labor hours. Compute the predetermined plantwide factory overhead
rate. (Round your answer to 2 decimal places.)
Predetermined plantwide factory overhead rate
per direct labor-hour
< Required 1
Required 2 >
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