Question

Donald has just been hired as an accountant and is in the process of performing some cost accounting calculations. The factory where he works produces tennis balls and uses a plant-wide cost pool under their simple costing system. The factory's total Manufacturing Overhead (MOH) costs are budgeted for: rent for the factory, $74000; factory utilities, $40800; quality control salaries, $53700; and janitorial salaries, $36200 in addition to assembly line workers' wages of $245700, tennis ball coating costs of $7000, and tennis ball core costs of $4600. What is the budgeted MOH rate using one plant-wide pool based on Direct Labor (DL) cost?

1) $4.44
2) $4.65
3) $7.92
4) $0.83

Answer 1

The budgeted MOH rate using one plant-wide pool based on Direct Labor (DL) cost is approximately $0.80.

Step-by-step explanation:

The budgeted MOH rate using one plant-wide pool based on Direct Labor (DL) cost can be calculated by dividing the total manufacturing overhead (MOH) costs by the direct labor cost. In this case, the total MOH costs are the sum of rent for the factory ($74,000), factory utilities ($40,800), quality control salaries ($53,700), and janitorial salaries ($36,200), which totals $204,700. The direct labor cost is the sum of assembly line workers' wages ($245,700), tennis ball coating costs ($7,000), and tennis ball core costs ($4,600), which totals $257,300. Therefore, the budgeted MOH rate is $204,700 divided by $257,300, which equals approximately $0.796 or $0.80. So, the correct option is 3) $7.92.