Hagar CoComputed an Overhead Rate for Machining Costs ($1,500,000) of $15

question 47

Short Answer

Hagar Co.computed an overhead rate for machining costs ($1,500,000) of $15 per machine hour.Machining costs are driven by machine hours.If computed based on direct labor hours, the overhead rate for machining costs would be $30 per direct labor hour.The company produces two products, Cape and Chap.Cape requires 60,000 machine hours and 20,000 direct labor hours, while Chap requires 40,000 machine hours and 30,000 direct labor hours.Using activity-based costing, machining costs assigned to each product is $$\begin{array} { l r r } & \text { Cape }& \text { Chap } \\\text { a. } & \$ 600,000 & \$ 900,000 \\\text { b. } & \$ 750,000 & \$ 750,000 \\\text { c. } & \$ 800,000 & \$ 700,000 \\\text { d. } & \$ 900,000 & \$ 600,000\end{array}$$

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Definitions:

Operating Activities

Activities directly related to the principal revenue-generating activities of an organization.

Accumulated Depreciation

The total amount of a tangible asset's cost that has been allocated as depreciation expense since the asset was acquired and put into use.

Cash Dividends

Cash distributions from a company's earnings to its shareholders.

Balance Sheet

An account that outlines the financial position of a company, detailing its assets, liabilities, and owners' equity at a given point in time.