Problem:
Nautical Accessories, Inc., manufactures women's boating hats. Manufacturing overhead is assigned to production on a machine-hour basis. For 2013, it was estimated that manufacturing overhead would total $359,520 and that 21,400 machine hours would be used.
Required:
Question 1: Calculate the predetermined overhead application rate that will be used for absorption costing purposes during 2013.
Question 2: During April, 3,900 hats were made. Raw materials costing $6,240 were used, and direct labor costs totaled $9,165. A total of 780 machine hours were worked during the month of April. Calculate the cost per hat made during April.
Question 3: At the end of April, 1,050 hats were in ending inventory. Calculate the cost of the ending inventory and the cost of the hats sold during April.
Note: Provide support for your rationale.