Question:
Wisconsin Dairy determined that the total predetermined OH rate for costing purposes is $26.80 per cow per day (referred to as an animal day). Of this, $25.20 is the variable portion. Overhead cost information for two levels of activity within the relevant range are as follows:
4,000 6,000
Animal Days Animal Days
|
Indirect materials
|
$25,600
|
$38,400
|
|
Indirect labor
|
56,000
|
80,000
|
|
Maintenance
|
10,400
|
13,600
|
|
Utilities
|
8,000
|
12,000
|
|
All other
|
15,200
|
21,600
|
a. Determine the ?xed and variable values for each of the preceding overhead items, and determine the total overhead cost formula.
b. Assume that the total predetermined OH rate is based on expected annual capacity. What is this level of activity for the company?
c. Determine expected overhead costs at the expected annual capacity.
d. If the company raises its expected capacity by 3,000 animal days above the present level, calculate a new total overhead rate for product costing.