Baby Co. estimates that its production for the coming year will be 10, 000 units, which is 80% of normal capacity, with the following unit costs:Materials P 40Direct labor 60Direct labor is paid at the rate of P24 per hour. The machine should be run for 20 minutes to produce one unit. Total estimated overhead is expected to consist of P400, 000 for variable overhead and P400, 000 for fixed overhead. What is the predetermined overhead rate base on material cost?

INTRODUCTION TO COST ACCOUNTING

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Question [CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]

Baby Co. estimates that it’s production for the coming year will be 10, 000 units, which is 80% of normal capacity, with the following unit costs:Materials P 40Direct labor 60Direct labor is paid at the rate of P24 per hour. The machine should be run for 20 minutes to produce one unit. Total estimated overhead is expected to consist of P400, 000 for variable overhead and P400, 000 for fixed overhead. What is the predetermined overhead rate base on material cost?

A	200%
B	150%
C	250%
D	300%

Explanation:

Detailed explanation-1: -Here is the formula broken down: Cost per unit = (Electricity + Rent + Labor + Raw materials) / Number of units.

Detailed explanation-2: -Unit cost is determined by combining the variable costs and fixed costs and dividing by the total number of units produced.

Detailed explanation-3: -Using the formula Total job cost = Direct materials + direct labor + applied overhead, Jared adds $400 + $660 + $366.74 to arrive at a total job cost of $1, 426.74.

Detailed explanation-4: -Variable Cost Formula. To calculate variable costs, multiply what it costs to make one unit of your product by the total number of products you’ve created. This formula looks like this: Total Variable Costs = Cost Per Unit x Total Number of Units.

There is 1 question to complete.