Compute the predetermined overhead rates

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Reference no: EM13554717

Two-Stage Allocation and Product Costing

Mets Products produces baseball caps and T-shirts. Most of the production is done by machine. Data on operations and costs for October follow:

 

Baseball Caps

T-Shirts

Total

Units produced

10,000

5,000

15,000

Machine-hours used

1,000

800

1,800

Direct labor-hours

200

120

320

Direct materials costs

$12,000

$8,000

$20,000

Direct labor costs

$ 4,000

$2,400

$ 6,400

Manufacturing overhead costs

 

 

$22,200

Management asks the firm's cost accountant to compute product costs. The accountant first assigns overhead costs to two pools: overhead related to direct materials and overhead related to machine hours. The analysis of overhead accounts by the cost accountant follows:

Account

Amount

Related to:

Utilities

$4,000

Machine-hours

Supplies

2,800

Materials

Machine depreciation and maintenance .

8,800

Machine-hours

Purchasing and storing materials

3,200

Materials

Miscellaneous

3,400

Machine-hours

Required

a. Compute the predetermined overhead rates assuming that Mets Products uses machine-hours to allocate machine-related overhead costs and materials costs to allocate materials-related overhead costs.

b. Compute the total costs of production and the cost per unit for each of the two products for October.

Reference no: EM13554717

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