A Company Reports the Following Information Regarding Its Production Cost

question 108

Essay

A company reports the following information regarding its production cost:
$\begin{array}{ll}\text { Units produced } & 14,000 \text { units } \\\text { Direct labor } & \$ 13 \text { per unit } \\\text { Direct materials } & \$ 3 \text { per unit } \\\text { Variable overhead } & ? \text { in total } \\\text { Fixed overhead } & \$ 56,000 \text { in total }\end{array}$ Required: Perform the following independent calculations.
a.Compute total variable overhead cost if the production cost per unit under variable costing is $73.
b.Compute total variable overhead cost if the production cost per unit under absorption costing is $73.

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Definitions:

Predetermined Overhead Rate

A rate used to allocate manufacturing overhead costs to products, calculated at the beginning of the period based on estimated costs and activity levels.

Overapplied Overhead

A situation where the allocated manufacturing overhead cost is more than the actual overhead cost incurred.

Underapplied Overhead

A situation where the allocated manufacturing overhead cost is less than the actual overhead incurred, resulting in a cost that needs to be accounted for in the financial statements.

Job Order Costing

An accounting method that accumulates costs for individual jobs or orders, commonly used in manufacturing goods or providing services that are distinct or custom.