Question

Based on their total sales forecast for the coming year, a company is expecting to incur $80,000 in material and subcontracts, $100,000 in direct engineering labor, and $80,000 in direct manufacturing labor. The company's total expected indirect expense of $368,100 consists of: $10,000 in indirect material O/H expenses; $125,000 in indirect engineering O/H expenses; $176,000 in indirect manufacturing O/H expenses; and $57,100 in G

Answer 1

Indirect material O/H expenses 12.5%

Indirect engineering O/H expenses 125%

Indirect manufacturing O/H expenses 220%

General and Administrative

expenses 10%

Step-by-step explanation:

Computation of Indirect rate

Using this formula

Indirect rate=Expense pool/Allocation base

Let plug in the formula

Indirect material O/H expenses=$10,000/$80,000

Indirect material O/H expenses=0.125*100

Indirect material O/H expenses=12.5%

Indirect engineering O/H expenses=$125,000/$100,000

Indirect engineering O/H expenses=1.25*100

Indirect engineering O/H expenses=125%

Indirect manufacturing O/H expenses =$176,000/$80,000

Indirect manufacturing O/H expenses=2.2*100

Indirect manufacturing O/H expenses=220%

Computation for General and Administrative

expenses using this formula

Indirect rate=Expense pool/(Total of Expense pool +Total of Allocation base)

Let plug in the formula

General and Administrative

expenses=$57,100/[($10,000+$125,000+$176,000)+($80,000+$100,000+$80,000)]

General and Administrative

expenses=$57,100/($311,000+$260,000)

General and Administrative

expenses=$57,100/$571,000

General and Administrative

expenses=0.1*100

General and Administrative

expenses=10%

Therefore the Indirect rate are:

Indirect material O/H expenses 12.5%

Indirect engineering O/H expenses 125%

Indirect manufacturing O/H expenses 220%

General and Administrative

expenses 10%