At the end of the construction year for his business, Cooper’s uncle David is having trouble dealing with the company’s indirect costs as there are just so many of them! To help his uncle (and because he hopes to take over the family business one day), Cooper listed a few examples of what he thought would be indirect costs for this company: glue, nails, staples, drywall compound, and tape. David then added supervisor costs, as well as depreciation of the construction trucks, generators, saws, and other equipment, to the list. Unfortunately, the total of these MOH costs, $495,000, significantly exceeded David’s budgeted MOH of $416,580. In the past, David assigned MOH costs to individual jobs based on the direct labor hours of his employees. At the beginning of the year, based on the work he had planned and still hoped to earn at that time, David budgeted for 131,000 DL hours. In reviewing the payroll records of his employees, David now sees that they actually worked 146,000 hours this year while receiving an average wage of $15 per hour. Based on the above information, determine the budgeted MOH rate based on DL hours, apply MOH for the year, and determine under- or overapplied MOH for the year. (Round MOH rate answer to 2 decimal places, e.g. 52.75.) Budgeted MOH rate $enter a dollar amount per direct labor hour rounded to 2 decimal places /DL hour Applied MOH $enter a dollar amount Difference $enter a dollar amount select an option
At the end of the construction year for his business, Cooper’s uncle David is having trouble dealing with the company’s indirect costs as there are just so many of them! To help his uncle (and because he hopes to take over the family business one day), Cooper listed a few examples of what he thought would be indirect costs for this company: glue, nails, staples, drywall compound, and tape. David then added supervisor costs, as well as depreciation of the construction trucks, generators, saws, and other equipment, to the list. Unfortunately, the total of these MOH costs, $495,000, significantly exceeded David’s budgeted MOH of $416,580.
In the past, David assigned MOH costs to individual jobs based on the direct labor hours of his employees. At the beginning of the year, based on the work he had planned and still hoped to earn at that time, David budgeted for 131,000 DL hours. In reviewing the payroll records of his employees, David now sees that they actually worked 146,000 hours this year while receiving an average wage of $15 per hour.
|
Budgeted MOH rate
|
$enter a dollar amount per direct labor hour rounded to 2 decimal places | /DL hour | |
|---|---|---|---|
|
Applied MOH
|
$enter a dollar amount | ||
|
Difference
|
$enter a dollar amount | select an option |
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Which cost driver would you recommend Cooper use going forward?
a)Actual MOH
B) Fixed MOH
C)DM Cost
d)DL hours
e)Applied MOH
by Bartleby ExpertPart C;
Cooper wondered if his uncle should consider a different allocation base, since this construction business is both labor-intensive and material-intensive. David agrees and determines that total DM costs incurred for the jobs worked on this year amounted to $1,226,000. At the beginning of the year, David’s budgeted DM costs (for the projects he knew about at the time) were $833,160.
Determine what the budgeted MOH rate would have been if David had used direct material cost as the cost driver. Further, determine applied MOH and under- or overapplied MOH for this scenario. (Round MOH rate answer to 2 decimal places, e.g. 52.75.)
|
Budgeted MOH rate
|
$enter a dollar amount per direct material cost rounded to 2 decimal places | /DM$ | |
|---|---|---|---|
|
Applied MOH
|
$enter a dollar amount | ||
|
Difference
|
$enter a dollar amount | select an option |
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