Savallas Company is highly automated and uses computers to control manufacturing operations. The company uses a job-order costing system and…
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Savallas Company is highly automated and uses computers to control manufacturing operations. The company uses a job-order costing system and applies manufacturing overhead cost to products on the basis of computer-hours. The following estimates were used in preparing the predetermined overhead rate at the beginning of the year: |
| Computer-hours | 85,000 | |
| Fixed manufacturing overhead cost | $ | 1,275,000 |
| Variable manufacturing overhead per computer-hour | $ | 3.00 |
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During the year, a severe economic recession resulted in cutting back production and a buildup of inventory in the company’s warehouse. The company’s cost records revealed the following actual cost and operating data for the year: |
| Computer-hours | 60,000 | |
| Manufacturing overhead cost | $ | 1,350,000 |
| Inventories at year-end: | ||
| Raw materials | $ | 400,000 |
| Work in process | $ | 160,000 |
| Finished goods | $ | 1,040,000 |
| Cost of goods sold | $ | 2,800,000 |
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| Required: |
| 1. |
Compute the company’s predetermined overhead rate for the year. |
| Predetermined overhead rate | $ overhead cost | $ | [removed] | |||
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