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    Overhead Allocation methods

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    Fraser Products, Inc, which produces copy machines for wholesale distributors in the Pacific Northwest, has just completed packaging an order from Kent Company for 150 Model 14 machines. Direct materials, purchased parts, and direct labor costs for the Kent order are as follows:

    Cost of direct materials $17,450
    Cost of Purchased parts $14,800
    Direct labor hours 140
    Average direct labor pay rate $16.50 per hour

    Overhead costs were applied at a single, plant-wide overhead rate of 240 percent of direct labor dollars.

    Using the traditional costing approach, compute the total cost of the Kent order.

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    Solution Preview

    Cost of the Kent Order

    This question uses Job Costing techniques to arrive at the cost of an order shipped to a customer.
    i. Job Costing requires that all direct costs of a job are recorded as incurred and all manufacturing overhead costs are allocated to the job using a predetermined allocation rate.

    ii. In this case, the predetermined ...

    Solution Summary

    Overhead Allocation methods and there effect on total cost