ACFI2003 WEEK2.docx - Tutorial 2 1. Lanen et al., (2017):...

Tutorial
2
1. Lanen et al., (2017): Review Q. 6-6, p. 227.
Predetermined overhead rates cost per unit of the allocation base used to charge
overhead to products.
The predetermined overhead rate is the value at which overhead is applied to one unit
of the cost allocation base.It is used in product costing to apply the overhead to the
units produced.
2. Lanen et al., (2017): Review Q 6-7, p. 227.
It would be ideal, but unlikely, that an allocation base would reflect direct causality
between the activity and the overhead cost.
3. Lanen et al., (2017): Exercises 6-39, p. 232.
Predetermined Overhead rate=$175,000/5,000=$35/hours
Predetermined overhead rate= Overhead cost/Volume of cost driver
4. Lanen et al., (2017): Problem 6-49, p. 234.
a. Machine-hours Materials
Utilities $48,000
Supplies $33,600
Machine depreciation and maintenance $105,600
Purchasing and storing materials $38,400
Miscellaneous $40,800
Total $194,400 $72,000
Machine-hours predetermined overhead rate=$194,400/10,800=$18/hours
Materials predetermined overhead rate=$72,000/160,000=0.45=45%
b.Total costs of production:
Jerseys Shorts Total
Machine-hours used 6,000 4,800 10,800