Question

Franklin expects to produce 500 chrome bumpers during the year. The bumpers are expected to use 4,000 parts, require 10 setups, and consume 1,000 hours of finishing time. Requirements Compute the predetermined overhead allocation rate for each activity. Compute the expected indirect manufacturing cost of each bumper.

Answer 1

Answer: See explanation

Explanation:

a. Compute the predetermined overhead allocation rate for each activity.

Predetermined overhead rate = Budgeted cost/Allocation base unit

Materials handling: $12,000/4000 = $3

Machine setup: $3100/10 = $310

Insertion of parts: $42000/4000 = 10.5

Finishing: $86000/1000 = 86

b. Compute the expected indirect manufacturing cost of each bumper.

= Total budgeted overhead cost/Expected total production

= $143100/500

= $282.6 per bumper.