Walter company uses a predetermined overhead rate based on direct labor hours to apply manufacturing overhead to jobs. The company's estimated costs for the next year are: Direct materials $3,000 Direct labor $20,000 Depreciation on factory equipment $6,000 Rent on factory $12,000 Sales salaries $29,000 Factory utilities $15,000 Indirect labor $5,000 It is estimated that 5,000 direct labor hours will be worked during the year. The predetermined overhead rate will be: $3.90 $5.90 $7.80 $7.60 None of the above
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.
Walter company uses a predetermined
| Direct materials | $3,000 |
| Direct labor | $20,000 |
| $6,000 | |
| Rent on factory | $12,000 |
| Sales salaries | $29,000 |
| Factory utilities | $15,000 |
| Indirect labor | $5,000 |
It is estimated that 5,000 direct labor hours will be worked during the year. The predetermined overhead rate will be:
$3.90
$5.90
$7.80
$7.60
None of the above
Please show the work.
Predetermined overhead rate = Manufacturing Overheads / Direct labor hours
Direct labor hours are given 5,000 hours.
Calculation for the Manufacturing Overheads is in the next setp.
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