6. Acme Manufacturing Company estimates factory overhead as a percentage of machine hours. On 1.1.11, Acme estimates total factory overhead of $400,000 for the year, and estimates 20,000 machine hours will be required during the year. During the year, 10,000 units of product are produced and sold, total factory overhead totaled $410,000 and 21,000 machine hours were used. Prime costs placed into production during the year totaled $500,000.
How much factory overhead was applied per machine hour? $__________
In total, how much factory overhead was applied during the year? $__________
What is the normal cost of the units produced? $__________
What is the actual cost of the units produced? $__________
To answer these questions, we need to calculate the factory overhead applied per machine hour, the total factory overhead applied during the year, the normal cost of the units produced, and the actual cost of the units produced.
1. Factory Overhead Applied Per Machine Hour:
Factory overhead is estimated as a percentage of machine hours. To calculate the factory overhead applied per machine hour, we can divide the estimated factory overhead by the estimated machine hours:
Factory Overhead Applied Per Machine Hour = Estimated Factory Overhead / Estimated Machine Hours
Factory Overhead Applied Per Machine Hour = $400,000 / 20,000
Factory Overhead Applied Per Machine Hour = $20
2. Total Factory Overhead Applied During the Year:
To calculate the total factory overhead applied during the year, we can multiply the actual machine hours used by the factory overhead applied per machine hour:
Total Factory Overhead Applied During the Year = Actual Machine Hours * Factory Overhead Applied Per Machine Hour
Total Factory Overhead Applied During the Year = 21,000 * $20
Total Factory Overhead Applied During the Year = $420,000
3. Normal Cost of the Units Produced:
The normal cost of the units produced is the sum of the prime costs placed into production during the year and the factory overhead applied during the year:
Normal Cost of the Units Produced = Prime Costs + Total Factory Overhead Applied During the Year
Normal Cost of the Units Produced = $500,000 + $420,000
Normal Cost of the Units Produced = $920,000
4. Actual Cost of the Units Produced:
The actual cost of the units produced is the total factory overhead incurred during the year plus the prime costs placed into production:
Actual Cost of the Units Produced = Total Factory Overhead + Prime Costs
Actual Cost of the Units Produced = $410,000 + $500,000
Actual Cost of the Units Produced = $910,000
So, the answers to the questions are:
- Factory Overhead Applied Per Machine Hour: $20
- Total Factory Overhead Applied During the Year: $420,000
- Normal Cost of the Units Produced: $920,000
- Actual Cost of the Units Produced: $910,000