University:
Grand Rapids Community College
Course:
Financial and Managerial Accounting: Information for Decisions - John J. Wild
Academic year:

2024
Views:

57

Pages:

1
Author:

stud_ice13

To allocate overhead costs using the plantwide overhead rate method, we need to follow a series of steps to compute the overhead rate and then use that rate to allocate costs to jobs based on actual usage. Let's break it down step-by-step. Step 1: Calculate the Plantwide Overhead Rate The formula to compute the plantwide overhead rate is: Plantwide Overhead Rate=Total Budgeted Overhead Costs Given: • • Total Budgeted Overhead Costs = $900,000 Total Budgeted Direct Labor Hours = 25,000 hours Plantwide Overhead Rate=900,00025,000=36 per direct labor hour Step 2: Allocate Overhead to a Job To determine how much overhead is allocated to a job, you multiply the plantwide overhead rate by the actual direct labor hours used for that job. Assuming the job uses 10 direct labor hours: Overhead Allocated to Job=Plantwide Overhead Rate×Actual Direct Labor Hours Allocated to Job=36×10=360 Summary of Results 1. Plantwide Overhead Rate: $36 per direct labor hour 2. Overhead Allocated to Job: $360 This method allows KartCo to allocate its overhead costs uniformly based on the direct labor hours worked, which is beneficial for budgeting and managing production costs effectively. Additional Notes You can further explore similar calculations in the "Do More" section (QS 17-1, QS 17-2, etc.) for practice with different scenarios and figures. If you have any more specific questions or additional data to work with, let me know!