Eastern Enterprises has three departments; Welding, Assembly and Spraying. Weldingcalculates its predetermined overhead absorption rate based on machine hours; Assembly is basedon direct labor hours while Spraying is based on direct labor cost. On 2021 January 01, thecompany had the following estimates:WELDING ASSEMBLY$720 000$700 000$35 000$120 000Production overhead costsDirect labor costMachine hours36 0002 500ASSEMBLY$7 200150SPRAYING$412 500$150 000Direct labor hours4 000The labor rate is $150 per hour for all departments.Job 303A which was started and completed during the year showed the following:WELDINGSPRAYINGDirect material$5 500$9 500Direct labor hours80Machine hours800100Rental of equipment for job 303A will amount to $35 275.Additional Information:20 0005 0008 00010050Eastern Enterprises recovers selling, distribution and administrative overheads at a rate of 20% ofproduction costs and profit is based on a margin of 20%.A. Compute overhead absorption rates for each department.B. Calculate the cost of Job 303A, clearly showing expected profit and selling price.

Name: Eastern Enterprises has three departments; Welding, Assembly and Spra
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Description: Eastern Enterprises has three departments; Welding, Assembly and Spraying. Weldingcalculates its predetermined overhead absorption rate based on machine hours; Assembly is basedon direct labor hours while Spraying is based on direct labor cost. On 2

Overhead rates are determined based on the budgeted direct labor hours. Overhead costs means the…

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ased on a margin 20%. A. Compute overhead absorption rates for each department. B. Calculate the cost of Job 303A, clearly showing expected profit and selling price.

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter2: Basic Cost Management Concepts

Section: Chapter Questions

Problem 21E: Ellerson Company provided the following information for the last calendar year: During the year,...

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