Chalmette Corporation produces flat-bottom boats. Each boat requires the following items.

Chalmette applies variable overhead based on direct labor hours. Total fixed overhead costs for 2011 are estimated at $500,000 and the company plans to attach actual fixed overhead to units produced.
Required:
a. What is Chalmette's predetermined variable overhead rate?
b. If Chalmette produces 3,000 boats during 2011, what is total estimated production cost? What is the cost per unit?
c. Assume that Chalmette increases employee wages to $12 per hour and that Chalmette decides to produce 2,500 boats. What will be Chalmette's total estimated production cost? What is the cost per unit?
d. Explain the reason for the cost per-unit differences in parts b and c. Prove your answer with computations.

Question

Chalmette Corporation produces flat-bottom boats. Each boat requires the following items.
  
Chalmette applies variable overhead based on direct labor hours. Total fixed overhead costs for 2011 are estimated at $500,000 and the company plans to attach actual fixed overhead to units produced.
Required:
a.	What is Chalmette's predetermined variable overhead rate?
b.	If Chalmette produces 3,000 boats during 2011, what is total estimated production cost? What is the cost per unit?
c.	Assume that Chalmette increases employee wages to $12 per hour and that Chalmette decides to produce 2,500 boats. What will be Chalmette's total estimated production cost? What is the cost per unit?
d.	Explain the reason for the cost per-unit differences in parts b and c. Prove your answer with computations.

Quizplus · Accepted Answer

The Answer of Chalmette Corporation produces flat-bottom boats. Each boat requires the following items.
  
Chalmette applies variable overhead based on direct labor hours. Total fixed overhead costs for 2011 are estimated at $500,000 and the company plans to attach actual fixed overhead to units produced.
Required:
a.	What is Chalmette's predetermined variable overhead rate?
b.	If Chalmette produces 3,000 boats during 2011, what is total estimated production cost? What is the cost per unit?
c.	Assume that Chalmette increases employee wages to $12 per hour and that Chalmette decides to produce 2,500 boats. What will be Chalmette's total estimated production cost? What is the cost per unit?
d.	Explain the reason for the cost per-unit differences in parts b and c. Prove your answer with computations.

Chalmette Corporation Produces Flat-Bottom Boats