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Problem 12-18 Allocation to accomplish smoothing LO 12-1, 12-2, 12-3 Walton Corporation estimated its overhead costs would...

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Accounting

Problem 12-18 Allocation to accomplish smoothing LO 12-1, 12-2,12-3

Walton Corporation estimated its overhead costs would be $22,200per month except for January when it pays the $155,700 annualinsurance premium on the manufacturing facility. Accordingly, theJanuary overhead costs were expected to be $177,900 ($155,700 +$22,200). The company expected to use 7,900 direct labor hours permonth except during July, August, and September when the companyexpected 9,800 hours of direct labor each month to buildinventories for high demand that normally occurs during theChristmas season. The company’s actual direct labor hours were thesame as the estimated hours. The company made 3,950 units ofproduct in each month except July, August, and September, in whichit produced 4,900 units each month. Direct labor costs were $23.40per unit, and direct materials costs were $10.50 per unit.

Required

  1. Calculate a predetermined overhead rate based on directlabor hours.

  2. Determine the total allocated overhead cost for January,March, and August.

  3. Determine the cost per unit of product for January,March, and August.

  4. Determine the selling price for the product, assumingthat the company desires to earn a gross margin of $21.70 perunit.

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