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Custom Auto Parts_overhead allocation rates




Question;Custom Auto Parts;manufactures parts to order for antique cars. Custom Auto Parts makes;everything from fenders to engine blocks. Each customer order is treated as a;job. The company currently has two jobs, No. 9823 and No. 9824 that are;complete, although overhead has not yet been applied. The company wants to know;what each job?s cost would be under alternative overhead allocation rates based;on: (1) direct labor cost, (2) direct labor hours, and (3) machine hours.;Estimates for this year are as follows;Direct labor cost $300,000;Direct;labor hours 25,000;Machine;hours 8,000;Overhead;costs $200,000;Depreciation;on machinery accounts for 75 percent of the overhead costs. The job-cost sheets;show;Job;9823 Job 9824;Direct material $1,000;$2,000;Direct;labor cost $1,400;$1,400;Direct;labor hours 150 130;Machine;hours 130 270;Determine the overhead allocation rate under the;three suggested allocation bases. Round to the two decimal places.;Calculate;the cost of Job 9823 and Job 9824 using each of the three bases. Round to two;decimal places.;Discuss;which allocation base appears preferable.


Paper#37223 | Written in 18-Jul-2015

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