Plantwide OverheadRate, Activity-Based Costing, Job CostsFoto-Fast Copy Shopprovides a variety of photocopying and...Plantwide OverheadRate,...

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Accounting

Plantwide OverheadRate, Activity-Based Costing, Job Costs
Foto-Fast Copy Shopprovides a variety of photocopying and printing services. On June5, the owner invested in some computer-aided photography equipmentthat enables customers to reproduce a picture or illustration,input it digitally into the computer, enter text into the computer,and then print out a four-color professional quality brochure.Prior to the purchase of this equipment, Foto-Fast Copy Shop'soverhead averaged $40,000 per year. After the installation of thenew equipment, the total overhead increased to $88,000 per year.Foto-Fast Copy Shop has always costed jobs on the basis of actualmaterials and labor plus overhead assigned using a predeterminedoverhead rate based on direct labor hours. Budgeted direct laborhours for the year are 8,000, and the wage rate is $8 per hour.
Required:
1.What was the predetermined overhead rate prior to the purchase ofthe new equipment?
$ per direct labor hour
2.What was the predetermined overhead rate after the new equipmentwas purchased?
$ per direct labor hour
3.Suppose Rick Anselm brought in several items he wanted photocopied.The job required 700 sheets of paper at $0.01 each and 48 minutesof direct labor time. What would have been the cost of Rick's jobon May 20? On June 20? If required, round your answers to thenearest cent.
Total job cost
May 20 $
June 20 $
4.Suppose that the owner decides to calculate two overhead rates, onefor the photocopying area based on direct labor hours as before,and one for the computer-aided printing area based on machine time.Estimated overhead applicable to the computer-aided printing areais $48,000, and forecasted usage of the machines is 2,000 hours.What are the two overhead rates? If required, round your answers tothe nearest cent.
Overhead Rate
Photo-copying $ per direct labor hour
Computer-aided printing $ per machine hour
Which overhead ratesystem is better—one rate or two?

Answer & Explanation Solved by verified expert

4.3 Ratings (893 Votes)

a Predetermined overhead rate prior to the purchase of the new equipment predetermined rate overheadbudgeted direct labour hour predetermined rate 400008000 See Answer

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In: AccountingPlantwide OverheadRate, Activity-Based Costing, Job CostsFoto-Fast Copy Shopprovides a variety of photocopying and...Plantwide OverheadRate, Activity-Based Costing, Job CostsFoto-Fast Copy Shopprovides a variety of photocopying and printing services. On June5, the owner invested in some computer-aided photography equipmentthat enables customers to reproduce a picture or illustration,input it digitally into the computer, enter text into the computer,and then print out a four-color professional quality brochure.Prior to the purchase of this equipment, Foto-Fast Copy Shop'soverhead averaged $40,000 per year. After the installation of thenew equipment, the total overhead increased to $88,000 per year.Foto-Fast Copy Shop has always costed jobs on the basis of actualmaterials and labor plus overhead assigned using a predeterminedoverhead rate based on direct labor hours. Budgeted direct laborhours for the year are 8,000, and the wage rate is $8 per hour.Required:1.What was the predetermined overhead rate prior to the purchase ofthe new equipment?$ per direct labor hour2.What was the predetermined overhead rate after the new equipmentwas purchased?$ per direct labor hour3.Suppose Rick Anselm brought in several items he wanted photocopied.The job required 700 sheets of paper at $0.01 each and 48 minutesof direct labor time. What would have been the cost of Rick's jobon May 20? On June 20? If required, round your answers to thenearest cent.Total job costMay 20$June 20$4.Suppose that the owner decides to calculate two overhead rates, onefor the photocopying area based on direct labor hours as before,and one for the computer-aided printing area based on machine time.Estimated overhead applicable to the computer-aided printing areais $48,000, and forecasted usage of the machines is 2,000 hours.What are the two overhead rates? If required, round your answers tothe nearest cent.Overhead RatePhoto-copying$ per direct labor hourComputer-aided printing$per machine hourWhich overhead ratesystem is better—one rate or two?

	Overhead Rate
Photo-copying	$	per direct labor hour
Computer-aided printing	$	per machine hour