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Indirect Cost Analysis

Hello. I need help in understanding and intepreting "Indirect Cost Analysis" type questions. Can someone answer the following questions for me so I can better understand Indirect Costing methodolgy. Please place answers under the appropriate corresponding questions (i.e. a, b, c) with solution methodology.

1. A manufacturer is estimating its overhead its overhead rate for the next fiscal year. The contractor expects to manufacture 24,500 units next year. Material costs are expected to be $175 per unit. Each unit will take 6.5 hours of labor at $8.75 per hour. The manufacturer's estimate for the total indirect costs is $325,000.

a. What is the manufacturing overhead rate using units (volume) as the base?

b. What is the manufacturing overhead recovery rate using total labor hours as the base?

c. What is the manufacturing overhead recovery rate using total labor costs as the
base?

2. Determine the manufacturing overhead expenses for a contract with a
requirement based on 1,575 units (use rates computed in question 1 above to calculate the expenses for a, b, and c below).

a. Manufacturing expenses (based on volume)?

b. Manufacturing expenses (based on labor hours)?

c. Manufacturing expenses (based on labor costs)?

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Solution Summary

Solution contains calculations of manufacturing overheads on the basis of volume,labor hours and labor cost .

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