Textra produces parts for a machine manufacturer. Parts go through two departments, Molding and Trimming. The company budgets overhead cost of $265,000 in the Molding department and $225,000 in the Trimming department. The company budgets 16,000 machine hours (MH) in Molding and 25,000 direct labor hours (DLH) in Trimming. Actual production information follows. Number of Units Molding Department Trimming Department Hours per Unit Total Hours Hours per Unit Total Hours Part Z 3,000 2.0 MH per unit 6,000 MH 3 DLH per unit 9,000 DLH Part X 4,000 2.5 MH per unit 10,000 MH 4 DLH per unit 16,000 DLH Totals 16,000 MH 25,000 DLH Required: 1. Compute the plantwide overhead rate using direct labor hours as the allocation base. 2. Determine the overhead cost per unit for each part using the plantwide rate.
Master Budget
A master budget can be defined as an estimation of the revenue earned or expenses incurred over a specified period of time in the future and it is generally prepared on a periodic basis which can be either monthly, quarterly, half-yearly, or annually. It helps a business, an organization, or even an individual to manage the money effectively. A budget also helps in monitoring the performance of the people in the organization and helps in better decision-making.
Sales Budget and Selling
A budget is a financial plan designed by an undertaking for a definite period in future which acts as a major contributor towards enhancing the financial success of the business undertaking. The budget generally takes into account both current and future income and expenses.
Textra produces parts for a machine manufacturer. Parts go through two departments, Molding and Trimming. The company budgets
| Number of Units | Molding Department | Trimming Department | |||||||
|---|---|---|---|---|---|---|---|---|---|
| Hours per Unit | Total Hours | Hours per Unit | Total Hours | ||||||
| Part Z | 3,000 | 2.0 | MH per unit | 6,000 | MH | 3 | DLH per unit | 9,000 | DLH |
| Part X | 4,000 | 2.5 | MH per unit | 10,000 | MH | 4 | DLH per unit | 16,000 | DLH |
| Totals | 16,000 | MH | 25,000 | DLH |
Required:
1. Compute the plantwide overhead rate using direct labor hours as the allocation base.
2. Determine the overhead cost per unit for each part using the plantwide rate.
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