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    Developing Unit Costs Using Normal Costing

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    The Coastal Landscaping and Snow Removal company uses normal costing to assign overhead costs to the firm's various jobs. Labor is charged to jobs at $25 per hour and for the upcoming winter session, overhead is estimated at $200,000 for $10,000 hours of activity.

    A. Using normal costing, what would be the total charge for removing snow from a mall parking lot that took four hours to clear?
    B. If actual overhead costs are $215,000 and actual hours worked are 11,000, is overhead overapplied or underapplied?

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    Solution Preview

    ** Please see the attached Excel file for the complete solution **

    1 Calculation of overhead Aplication Rates
    Cost Driver Predetermined Overhead Rate
    Formula for overhead Rate Budgeted Overhead rate

    Direct labor hours Budgeted overheads $200,000
    Budgeted Direct labor hours 10000
    Overhead application rate per hour $20

    A Statement showing the total charge for removing snow from a mall parking lot.
    Direct labor @ $25 per hour for 4 hours. $100
    Overhead @$20 per hour for 4 hours $80
    Total charge for removal of snow using normal costing. $180

    B ...

    Solution Summary

    This solution explains how to cost a product, given various factors, in Excel.