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Determine the total allocated overhead cost

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Lagatta Corporation's overhead costs are usually $24,000 per month. However, the company pays $54,000 of real estate tax on the factory facility in March. Thus, the overhead costs for March increase to $78,000. The company normally uses 5,000 direct labor hours per month except for August, September, and October, in which the company requires 9,000 hours of direct labor per month to build inventories for high demand in the Christmas season. Last year, the company's actual direct labor hours were the same as usual. The company made 5,000 units of product in each month except August, September, and October in which it produced 9,000 units per month. Direct labor costs were $8 per unit; direct materials costs were $7 per unit.

Required

a. Calculate a predetermined overhead rate based on direct labor hours.

b. Determine the total allocated overhead cost for the months of March, August, and December.

c. Determine the cost per unit of product for the months of March, August, and December.

d. Determine the selling price for the product, assuming that the company desires to earn a gross margin of $7 per unit.

Reference no: EM13547978

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