Factory overhead cost is allocated to cases of canned goods

Assignment Help Accounting Basics

Reference no: EM13596181

Weld Canning company has a busy season lasting six months from September through February and a slack season lasting from March through august. Typical data for these seasons are as follows:

Average monthly direct labors in a busy season = 15,000, in slack season = 5,000.
Average monthly factory overhead costs = $180,000 in busy season, and $80,000 in slack season.

Factory overhead cost is allocated to cases of canned goods on the basis of direct labor hours. The typical case requires one direct labor-hour. The same type of products is packed in all months. On December 31, the company has 25,000 cases in finished goods inventory.

Questions -

a) If the company allocated each month's factory overhead costs to the products made in that month, what would be the factory overhead cost per case in the busy season and in the slack season, respectively? What would be the factory overhead cost component of finished goods inventory?

b) If, instead, the company used a predetermined annual overhead rate, what would be its cost per case? What would be the factory overhead cost component of finished goods inventory?

c) Discuss which method of overhead allocation is preferable.

Reference no: EM13596181

Questions Cloud

Apollo company manufactures a single product that sells for : apollo company manufactures a single product that sells for 160 per unit and whose total variable costs are 120 per

On january 1 2004 ellen inc established a petty cash fund : on january 1 2004 ellen inc. established a petty cash fund of 200. on december 31 2004 the petty cash fund was examined

Exchange rate relationships between the us dollar and the : exchange rate relationships between the u.s. dollar and the euro have been quite volatile. when the euro began trading

A company has inventory of 17 units at a cost of 23 each on : a company has inventory of 17 units at a cost of 23 each on june 1. on june 3 it purchased 33 units at 25 each. 22

Factory overhead cost is allocated to cases of canned goods : weld canning company has a busy season lasting six months from september through february and a slack season lasting

Machinery is purchased on july 1 of the current fiscal year : machinery is purchased on july 1 of the current fiscal year for 180000. it is expected to have a useful life of 4 years

How many phospholipid molecules with an area of 8 x 10-19 : how many phospholipid molecules with an area of 8 x 10-19 m2 are needed to make the cell membrane for a cell of 10um

Jackie makes and sells handmade beaded jewelry she : jackie makes and sells handmade beaded jewelry. she anticipates selling 100 necklaces in march and prepared the

Bereavement leave your organization is the manufacturing : your organization is the manufacturing company with employees in the following provinces ltbrgt ltbrgtbritish columbia

User Account

All Pages