Managerial Accounting
Chapter 2+3:
Job-Order Costing:
Calculating Unit Product Costs
Cost Flows and External Reporting
Recap Exercise 1
Taveras Corporation currently operates at 50% of its available manufacturing
capacity. It uses job-order costing with a plantwide predetermined overhead rate
based on machine-hours. At the beginning of the year, the company made the
following estimates:
Required: Compute the company’s plantwide predetermined overhead rate.
Solution:
Machine-hours required to support estimated production (a)………. 165,000
Variable manufacturing overhead cost per machine-hour (b)............. $2.00
Variable overhead (a) × (b)................................................................ $330,000
Fixed overhead…..………..………………………………………… $1,980,000
Total overhead (c) ……………………………………………………$2,310,000
Predetermined overhead rate (c) ÷ (a).................................................$14.00 per
machine-hours
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