1. What are the advantage of using the Normal costing approach to compute the total cost of the product rather than to use Actual costing approach?

2. Compute the predetermined overhead rate under the current method.

3. Determine the unit product cost of EACH product for the current year under the simple costing system.

4. Compute the over- or under – allocated manufacturing overhead for Peter Company.

 

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Peter Company manufactures two products, Product A and Product B. Peter adopts a simple job costing system and uses normal costing system to compute the cost of each product. A single pre-determined plant-wide overhead rate is used based on direct labor hours as cost allocation base. The company estimated it would incur $500,000 in manufacturing overhead costs. The Actual manufacturing overhead is $520,000. The followings are some relevant information for Peter Company: Product A $10 $15 5 hours 12,000 units 60,000 hours 55,000 hours Direct material cost per unit (Actual) Direct labor cost per unit (Actual) Actual Direct labor hours to produce 1 unit Budgeted number of units produced Total Budgeted direct labor hours Total Actual direct labor hours Product B $20 $18 2 hours 20,000 units 40,000 hours 50,000 hours Peter Company manufactures two products, Product A and Product B. Peter adopts a simple job costing system and uses normal costing system to compute the cost of each product. A single pre-determined plant-wide overhead rate is used based on direct labor hours as cost allocation base. The company estimated it would incur $500,000 in manufacturing overhead costs. The Actual manufacturing overhead is $520,000. The followings are some relevant information for Peter Company: Product A $10 $15 5 hours 12,000 units 60,000 hours 55,000 hours Direct material cost per unit (Actual) Direct labor cost per unit (Actual) Actual Direct labor hours to produce 1 unit Budgeted number of units produced Total Budgeted direct labor hours Total Actual direct labor hours Product B $20 $18 2 hours 20,000 units 40,000 hours 50,000 hours

Answer rating: 100% (QA)

Answer 1 Normal costing records actual expenditures as they occur in the course of production The bi... View the full answer