Sparkle Company Produces Ornamental Trees and Uses Normal Costing A Calculate Applied Overhead

question 42

Essay

Sparkle Company produces ornamental trees and uses normal costing. Sparkle applies overhead based on direct labour hours. The following data are provided: $\begin{array}{lrr}&\text { Budgeted }&\text { Actual }\\\text { Overhead } & \$ 400,000 & \$ 392,000 \\\text { Machine Hours } & 20,000 & 18,000 \\\text { Direct Labour Hours } & 16,000 & 17,840 \\\text { Direct Materials Cost } & & \$ 521,000 \\\text { Direct Labour Cost } & & \$ 410,000 \\\text { Units Produced } & & 10,000\end{array}$ A. Calculate applied overhead.
B. Calculate the unit cost.

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Definitions:

Fixed Costs

Fixed charges that are unaffected by the volume of output or the quantity sold, including rental fees and payrolls.

Production Data

Information related to the amount, type, and quality of goods or services produced.

Contribution Margin

A financial metric that represents the difference between the sales revenue of a product and the variable costs associated with producing that product.

Break-Even Point

The financial position at which total revenues equal total costs and expenses, with no net profit or loss, often used to analyze the viability of a business or project.