Sherwin Williams uses traditional volume based costing to determine its product costs. This is the method we
Question:
Sherwin Williams uses traditional volume based costing to determine its product costs. This is the method we learned in chapter 3 Job Order Costing. Currently, Sherwin Williams allocates overhead based on direct labor hours. The company estimated 10,000 direct labor hours and total overhead of $1,970,000 for the year. They have determined the following activity cost pools for overhead cost.
Overhead Activities
Machine setup $950,000
Material handling $820,000
Machine operation $200,000
Total $1,970,000
Note: Activity cost pools aren’t necessary for traditional volume based costing. If the company switched to Activity-Based Costing, the activity cost pools would be necessary.
In January the company completed one batch of Mirlite paint and one batch of Subdue. The following data are for the production of single batches of the two products.
Mirlite Subdue
Gallons produced 50,000 30,000
Direct labor hours 400 250
Machine hours 800 250
Direct labor cost $10,000 $7,500
Direct materials cost $350,000 $150,000
Required:
Show all calculations (including formulas) to receive full credit.
- Calculate the pre-determined overhead rate for the year.
- Calculate applied overhead for Mirlite in January.
- Calculate applied overhead for Subdue in January.
- Calculate the unit product cost for Mirlite.
- Calculate the unit product cost for Subdue.
- what advantages might activity-based costing offer over traditional based costing for Sherwin-Williams?
Expert Answer:
To calculate the predetermined overhead rate for the year Step 1 Calculate the total estimated overhead cost for the year by summing up the overhead a... View the full answer
Managerial Accounting
ISBN: 9781259275814
11th Canadian Edition
Authors: Ray H Garrison, Alan Webb, Theresa Libby
