Freeze Frame, Inc A Compute a Departmental Overhead Rate for Department a Based

question 193

Essay

Freeze Frame, Inc. produces cameras that require three processes, A, B, and C, to complete. Digital camera model #789 is the best-selling of all the many types of cameras produced. Information related to the 550,000 units of digital camera model #789 produced annually is shown below.


Freeze Frame's total expected overhead costs and related overhead data are shown below:

$$\begin{array} { | l | l | l | l | } \hline & \text { Department A } & \text { Department B } & \text { Department C } \\\hline \text { Direct labor hours } & 90,000 \mathrm { DLH } & 75,000 \mathrm { DLH } & 42,000 \mathrm { DLH } \\\hline \text { Machine hours } & 67,500 \mathrm { MH } & 135,000 \mathrm { MH } & 53,200 \mathrm { MH } \\\hline \text { Manufacturing overhead costs } & \$ 540,000 & \$ 675,000 & \$ 399,000 \\\hline\end{array}$$

a. Compute a departmental overhead rate for department A based on direct labor hours.
b. How much overhead is associated with model 789 from department A?
c. Compute a departmental overhead rate for department B based on direct labor hours.
d. How much overhead is associated with model 789 from department B?
e. Compute a departmental overhead rate for department C based on direct labor hours.
f. How much overhead is associated with model 789 from department C?
g. What is the per unit cost of the 550,000 units of model 789?

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Definitions:

Average Variable Cost

is the cost that varies with the level of output, calculated by dividing the total variable costs by the quantity of output produced.

Diminishing Returns

A rule that asserts when one input in the production process is augmented without changes to the others, there will ultimately be a decline in output after reaching a specific level.

Average Fixed Cost

The cost per unit that remains constant regardless of the level of production or output.

Output

The total amount of goods or services produced by a company or economy.