Share
Explore BrainMass

Predetermined Overhead Rates - Full Cost and Selling Price

Compute a departments predetermined over head rate using traditional costing and use it to determine the full cost and selling price for a regular meal and a special meal

Raw materials $875,000
Direct Labor $1,145,000
Overhead $1,533,000

Dept expected to make 300,000 regular meals and 50,000 special meals

Regular Special
Direct Material $2.25 $4.00
Direct Labor 3.20 3.70

Cost Driver Budgeted Activity Budgeted cost
Purchasing Purchase Orders 620 527,000
Mat. hand Set ups 36,000 720,000
Quality control Batches 13,000 195,000
Packaging Packaging hours 14,000 91,000

Cost Driver Unit of Activity Regular Special
Budgeted Meals meals 300,000 50,000
Batch size meals in a batch 100 5
Setups per batch 2 3
Purchase Order meals in a PO 2500 100
Packaging hours per 100 meals 4 4

Solution Preview

Computation of predetermined overhead rate:

I have taken Direct Labor as the base for determining the peredetermined overhead rate
Thus the predetermined overhead rate = Overhead/Direct Labor

=1533000/1145000
1.34 times

Computation of cost ...

Solution Summary

Compute a departments predetermined over head rate using traditional costing and use it to determine the full cost and selling price for a regular meal and a special meal...

$2.19