Marquis Company estimates that annual manufacturing overhead costs will be $894,600. Estimated annual operating activity bases are direct labor cost $497,000, direct labor hours 49,700, and machine hours 99,400. Compute the predetermined overhead rate for each activity base. (Round answers to 2 decimal places, e.g. 10.50% or 10.50.) Overhead rate per direct labor cost enter percentages rounded to 2 decimal places % Overhead rate per direct labor hour $enter a dollar amount rounded to 2 decimal places Overhead rate per machine hour
Process Costing
Process costing is a sort of operation costing which is employed to determine the value of a product at each process or stage of producing process, applicable where goods produced from a series of continuous operations or procedure.
Job Costing
Job costing is adhesive costs of each and every job involved in the production processes. It is an accounting measure. It is a method which determines the cost of specific jobs, which are performed according to the consumer’s specifications. Job costing is possible only in businesses where the production is done as per the customer’s requirement. For example, some customers order to manufacture furniture as per their needs.
ABC Costing
Cost Accounting is a form of managerial accounting that helps the company in assessing the total variable cost so as to compute the cost of production. Cost accounting is generally used by the management so as to ensure better decision-making. In comparison to financial accounting, cost accounting has to follow a set standard ad can be used flexibly by the management as per their needs. The types of Cost Accounting include – Lean Accounting, Standard Costing, Marginal Costing and Activity Based Costing.
Marquis Company estimates that annual
Compute the predetermined overhead rate for each activity base. (Round answers to 2 decimal places, e.g. 10.50% or 10.50.)
| Overhead rate per direct labor cost |
enter percentages rounded to 2 decimal places
|
% | |
|---|---|---|---|
| Overhead rate per direct labor hour |
$enter a dollar amount rounded to 2 decimal places
|
||
| Overhead rate per machine hour |
Manufacturing Overhead:
Manufacturing overhead is also known as the Indirect Costs. Those are the costs that are not directly related to the production or manufacturing process. These costs include indirect material costs, depreciation of factory equipment, etc.
It is always difficult to assign these costs to the units produced, therefore, we compute the predetermined overhead rate to assign these costs for the accounting period.
Pre-determined Overhead Rate:
The predetermined overhead rate is computed by dividing the estimated overhead rate by the estimated activity base. The activity base can be direct labor hours, direct labor cost, machine-hours, etc. These are then multiplied with the actual activity base to calculated the Applied Manufacturing Overhead for the period.
Formula:
Predetermined Overhead Rate = Estimated Manufacturing Overhead/Estimated Activity Base
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