Question

Attire, Inc., is a jeans manufacturing company. Attire uses a plantwide rate based on direct labor hours to assign its overhead costs. The company has the following estimated and actual data for the coming year: Estimated overhead $1,000,000 Expected activity 250,000 Actual activity (direct labor hours) 265,000 Units produced 500,000 Attire applies overhead cost to each unit by using predetermined plantwide overhead rate based on direct labor hours. Calculate the overhead cost per unit of jeans produced by Attire. a.$4.24 b.$2.12 c.$4.00 d.$2.65

Answer 1

Unitary overhead= $2.12

Step-by-step explanation:

Giving the following information:

Estimated overhead $1,000,000

Expected activity 250,000

Actual activity (direct labor hours) 265,000

Units produced 500,000

First, we need to calculate the predetermined overhead rate:

Predetermined manufacturing overhead rate= total estimated overhead costs for the period/ total amount of allocation base

Predetermined manufacturing overhead rate= 1,000,000/250,000

Predetermined manufacturing overhead rate= $4 per direct labor hour

Now, we can allocate overhead:

Allocated MOH= Estimated manufacturing overhead rate* Actual amount of allocation base

Allocated MOH= 4*265,000

Allocated MOH= $1,060,000

Finally, the unitary value:

Unitary overhead= 1,060,000/500,000

Unitary overhead= $2.12