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book exercise for Swannworth Inc.

Swannworth Inc., expects its overhead costs for the coming fiscal period to be $78,300. Total direct labor charges should be 3,000 hours at $10 per hour plus 900 hours at $l5 per hour.
a. Compute the predetermined overhead rate, using direct labor dollars as the allocation base.
b. Ignoring the information given above, consider the following data, which are provided in anticipation of the coming accounting period. Using these data, prepare a schedule to determine the cost of one unit of product.

1. One unit of product requires .50 unit of material X, which costs $30 per unit, and 2 units of material Y, which costs $12 per unit.
2. One year's interest on a loan for the office building leasehold improvements amounts to $6,400.
3. 80,000 units of sales are planned at $99 per unit.
4. One unit of product requires 1.5 hours of direct labor at $10 per hour plus .
5 hour of direct labor at $15 per hour. 5. Administrative salaries should amount of $116,000 for the coming fiscal period.

The predetermined overhead rate to be used is 110% of direct labor dollars.

Solution Preview

Swannworth Inc., expects its overhead costs for the coming fiscal period to be $78,300. Total direct labor charges should be 3,000 hours at $10 per hour plus 900 hours at $l5 per hour.

a. Compute the predetermined overhead rate, using direct labor dollars as the allocation base.
10 X 3000 = 30,000 and 900 X 15 = 13,500 total 43,500.
Since there is no indication about the number of days involved in the equation we have to use the entire amounts.

78,300/43,500. We are looking at a percentage from the overhead costs ...

Solution Summary

The solution assists with answering a book exercise for Swannworth Inc. It computes the predetermined overhead rate.

$2.19