Principles of Managerial Accounting · free preview
Predetermined Overhead and Total Cost under Traditional Allocation
Traditional overhead allocation pools all manufacturing overhead and applies it with one plantwide rate, usually per labor-hour or machine-hour, which is simple but can distort product costs when products differ in complexity.
1. The plantwide rate tradition
The plantwide rate tradition
2. Applying the rate to products
Applying the rate to products
3. When the single base distorts
When the single base distorts
4. The total cost picture
The total cost picture
5. Plantwide rate computation
Estimated overhead is 900,000 dollars and estimated direct labor-hours are 60,000. Compute the plantwide predetermined overhead rate.
6. Product overhead application
The plantwide rate is 15 dollars per labor-hour. Product B consumes 8 labor-hours per unit. Compute overhead applied per unit of B.
7. Distortion direction
A complex, low-volume product with many setups but few labor-hours will be costed how under a labor-hour plantwide rate?
8. Decision consequence
A systematic undercosting of a complex product most directly leads to which decision error?
9. Total product cost
Unit overhead of 30 dollars joins 40 dollars of materials and labor for Product A. Compute total unit cost in dollars, number only.
10. Single base assumption
Plantwide allocation assumes that one base, usually labor-hours, ____ all overhead cost. One word.
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