TyeDye Lights makes two products: Party and Holiday. It takes 80,900 direct labor hours to manufacture the Party Line and 93,500 direct labor hours to manufacture the Holiday Line. Overhead consists of $225,000 in the machine setup cost pool and $149,960 in the packaging cost pool. The machine setup pool has 52,000 setups for the Party product and 98,000 setups for the Holiday product. The packaging cost pool has 26,000 parts in the Party product and 39,200 parts for the Holiday product. Using the traditional cost method of direct labor hours, what is the predetermined overhead rate?

Question

BlackTom AI · Accepted Answer

Predetermined overhead rate = total estimated overhead ÷ total estimated allocation base (direct labor hours in the traditional method).

1) Relevant knowledge points and concepts
- The traditional (single-rate) costing method pools all overhead and divides by a single allocation base (here, direct labor hours, DLH) to compute a predetermined overhead rate (POHR).
- Even if overhead is broken into activity pools (machine setup, packaging), under the traditional method you sum all overhead costs and ignore individual activity drivers when computing the single POHR.

2) Step-by-step reasoning
- Sum all overhead costs from the two pools to get total estimated overhead.
- Sum the direct labor hours for both products to get the total allocation base.
- Divide total overhead by total direct labor hours to obtain the predetermined overhead rate per DLH.

3) Calculations with intermediate steps
- Machine setup cost pool = $225,000
- Packaging cost pool = $149,960
- Total estimated overhead = $225,000 + $149,960 = $374,960
- Direct labor hours: Party = 80,900 DLH; Holiday = 93,500 DLH
- Total DLH = 80,900 + 93,500 = 174,400 DLH
- POHR = Total overhead ÷ Total DLH = $374,960 ÷ 174,400
- Compute quotient: 174,400 × 2 = 348,800; remainder = 374,960 − 348,800 = 26,160. Remainder ÷ 174,400 = 0.15. Therefore POHR = 2 + 0.15 = $2.15 per DLH.

4) Why the correct answer is correct
- By definition of the traditional costing POHR using DLH, summing the two overhead pools and dividing by total DLH yields $2.15/ DLH. This follows the standard formula and arithmetic exactly.

5) Why other approaches/options would be incorrect
- Using individual activity drivers (setups, parts) to compute multiple activity rates would be Activity-Based Costing, not the traditional single-rate DLH method. Dividing overhead by number of setups or parts, or computing per-product rates, would not answer the question as asked.

6) Conclusion
- The predetermined overhead rate under the traditional direct-labor-hour method is $2.15 per direct labor hour, which matches the provided answer.

类似问题

PA 2 - What is the predetermined overhead rate if direct labor hours are considered the cost driver?

EA 7 - What was the predetermined overhead rate using direct labor hours?

Which of the following correctly describes the predetermined manufacturing overhead rate?

更多留学生实用工具

智能学习助手

风格化写作助手

论文查重助手

文献引用助手

课堂转译助手

课堂笔记助手

Quiz搜索助手

学校历年真题

智能刷题助手

智能匹配练习

希望你的学习变得更简单