Baird Corporation estimated its overhead costs would be $23,500
per month except for January when it pays the $162,360 annual
insurance premium on the manufacturing facility. Accordingly, the
January overhead costs were expected to be $185,860 ($162,360 +
$23,500). The company expected to use 7,400 direct labor hours per
month except during July, August, and September when the company
expected 10,000 hours of direct labor each month to build
inventories for high demand that normally occurs during the
Christmas season. The company’s actual direct labor hours were the
same as the estimated hours. The company made 3,700 units of
product in each month except July, August, and September, in which
it produced 5,000 units each month. Direct labor costs were $24.90
per unit, and direct materials costs were $10.40 per unit.
Required
- Calculate a predetermined overhead rate based on direct labor
hours.
- Determine the total allocated overhead cost for January, March,
and August.
- Determine the cost per unit of product for January, March, and
August.
- Determine the selling price for the product, assuming that the
company desires to earn a gross margin of $20.20 per unit.
