The management accountant at Morrison,Inc.provided the following estimated costs for producing 2,500 units of a specialty product manufactured by the firm:
$\begin{array}{lr}
\text { Direct Materials } & \$ 10,000 \
\text { Direct Labor (1 hour per unit) } & 5,000 \
\text { Unit-level support costs } & 10,000 \
\text { Batch level support costs } & 5,000 \
\text { Product-level support costs } & 3,000 \
\text { Facility-level support costs } & 7,000
\end{array}$
The company believes that direct labor hours are the most appropriate cost driver for assigning overhead costs to its product.
Required:
1)Compute the predetermined overhead rate for this company.
2)Compute the specialty product's total estimated cost per unit.
3)Why do firms assign overhead costs using a predetermined overhead rate instead of assigning actual costs?

Question

The management accountant at Morrison,Inc.provided the following estimated costs for producing 2,500 units of a specialty product manufactured by the firm:
 $\begin{array}{lr}
 \text { Direct Materials } & \$ 10,000 \
\text { Direct Labor (1 hour per unit) } & 5,000 \
\text { Unit-level support costs } & 10,000 \
\text { Batch level support costs } & 5,000 \
\text { Product-level support costs } & 3,000 \
\text { Facility-level support costs } & 7,000
\end{array}$
 The company believes that direct labor hours are the most appropriate cost driver for assigning overhead costs to its product.
Required:
1)Compute the predetermined overhead rate for this company.
2)Compute the specialty product's total estimated cost per unit.
3)Why do firms assign overhead costs using a predetermined overhead rate instead of assigning actual costs?

Quizplus · Accepted Answer

The Answer of The management accountant at Morrison,Inc.provided the following estimated costs for producing 2,500 units of a specialty product manufactured by the firm:
 $\begin{array}{lr}
 \text { Direct Materials } & \$ 10,000 \
\text { Direct Labor (1 hour per unit) } & 5,000 \
\text { Unit-level support costs } & 10,000 \
\text { Batch level support costs } & 5,000 \
\text { Product-level support costs } & 3,000 \
\text { Facility-level support costs } & 7,000
\end{array}$
 The company believes that direct labor hours are the most appropriate cost driver for assigning overhead costs to its product.
Required:
1)Compute the predetermined overhead rate for this company.
2)Compute the specialty product's total estimated cost per unit.
3)Why do firms assign overhead costs using a predetermined overhead rate instead of assigning actual costs?

The Management Accountant at Morrison,Inc The Company Believes That Direct Labor Hours Are the Most