Catalytic Chemical Corporation has a significant level of manufacturing overhead. After preparing their budget for the next year, management expects the following overhead costs (the cost driver for each overhead cost pool is also shown):ActivityTotal CostCost DriverMaintenance$20,000Machine hoursMaterials receiving80,000Shipments receivedMachine setups50,000# of setupsInspection30,000# of inspectionsThe expected activity for the year for various cost drivers is:Direct Labor Hours40,000Machine Hours20,000Shipments Received4,000Setups200Quality Inspections8,000The company is considering accepting a significant production contract. Estimates for the contract are as follows:Direct materials$100,000Direct labor (7,500 hours)$150,000Number of material shipments received290Number of inspections50Number of setups35Number of machine houre3,000NOTE: Round all per-unit costs to nearest cent.What amount of overhead would be allocated to the contract if a company-wide rate based on direct labor hours were used?

Overhead costs, sometimes called overhead or operating expenses, are the expenses incurred by a…

Answered: Catalytic Chemical Corporation has a…

Financial And Managerial Accounting

15th Edition

ISBN:9781337902663

Author:WARREN, Carl S.

Publisher:WARREN, Carl S.

Chapter19: Support Department And Joint Cost Allocation

Section: Chapter Questions

Problem 2CMA: Adam Corporation manufactures computer tables and has the following budgeted indirect manufacturing...

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Catalytic Chemical Corporation has a significant level of manufacturing overhead. After preparing their budget for the next year, management expects the following overhead costs (the cost driver for each overhead cost pool is also shown):

Activity	Total Cost	Cost Driver
Maintenance	$20,000	Machine hours
Materials receiving	80,000	Shipments received
Machine setups	50,000	# of setups
Inspection	30,000	# of inspections

The expected activity for the year for various cost drivers is:

Direct Labor Hours	40,000
Machine Hours	20,000
Shipments Received	4,000
Setups	200
Quality Inspections	8,000

The company is considering accepting a significant production contract. Estimates for the contract are as follows:

Direct materials	$100,000
Direct labor (7,500 hours)	$150,000
Number of material shipments received	290
Number of inspections	50
Number of setups	35
Number of machine houre	3,000

NOTE: Round all per-unit costs to nearest cent.

What amount of overhead would be allocated to the contract if a company-wide rate based on direct labor hours were used?

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